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LSDefine
Simple English definitions for legal terms
bearer security
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A quick definition of bearer security:
A bearer security is a type of document that shows ownership or creditor relationship with a company or government. It can be a stock, bond, or other type of investment. The value of a bearer security depends on the financial condition of the company or government that issued it. It is important to keep bearer securities safe because whoever holds the document is considered the owner.
A more thorough explanation:
A bearer security is a type of security that represents ownership or creditor rights in a company or government. It is called a "bearer" security because whoever holds the physical certificate is considered the owner or creditor.
For example, a bearer bond is a type of debt security that is not registered in the owner's name. Instead, whoever holds the physical bond certificate can claim the principal and interest payments.
Another example is a bearer share, which is a type of stock that is not registered in the owner's name. Instead, whoever holds the physical share certificate is considered the owner and can claim any dividends or voting rights.
Bearer securities can be risky because they can be easily lost or stolen, and whoever holds the physical certificate can claim ownership or creditor rights. However, they can also be convenient for investors who want to remain anonymous or transfer ownership without going through a formal registration process.