A Legal View Of What Securities Are

21 October 2019
 Categories: Law, Blog

Few topics can cause people to feel nervous about their knowledge as much as securities law. Even if you're a corporate lawyer, securities are a tough concept to deal with. For many businesses, though, issuing securities is an essential part of getting the capital they need. That's a good reason to learn about what securities are and how they might involve your business.

Financial Instruments

A security is a type of financial instrument that's centered on at least one of three things. First, some securities include ownership rights, with stocks being the most recognizable of this class. Second, there are securities that create a creditor relationship, such as a bond issued by a corporation or a government. Third, some securities form other rights, such as options contracts.

You'll note the common theme of rights that runs through each of these different financial instruments. With everyday financial instruments like loans, most of the rights rest with the issuing party. When it comes to securities, though, most of the rights sit with the purchasing party.

Tradable Instruments

The rights encompassed in securities can be transferred to others. This makes them assets, and by extension, that makes them into forms of investments. You'll find primary and secondary markets for trading in virtually all securities that are legally recognized. A wide range of things can be securitized, including debt obligations. Yes, the value contained within a debt obligation can be turned into an asset by converting it into a security that can be bought and sold.


Issuing parties end up with certain duties that are attached to securities. While securities can have duties assigned to them by their issuers, most of the rules governing securities have been imposed under federal and state laws. In particular, a series of acts of Congress from the 1930s form the bulk of what is now considered securities law. Reforms passed in the last few decades provide most of the updates we use today.

The main reason it's important to have a securities law attorney assist a company is to observe the assigned duties that issuers and their officers have. For example, officers of a stock-issuing company have a duty to embargo actionable financial information until it can be released to the public on a schedule. News of a merger might have to be embargoed until the company issues its quarterly financial reports. An attorney can help you navigate these tricky waters.

Visit a website like http://carterwestlaw.com for more information.