Legal Definitions - periodic-payment-plan certificate

A periodic-payment-plan certificate is a document that serves as evidence of ownership or participation in an investment plan where the investor makes regular, scheduled payments over a period of time, rather than a single lump-sum payment. It certifies the investor's accumulated stake or shares acquired through these ongoing contributions. While similar to a stock certificate in that it represents ownership, its distinguishing feature is its connection to an installment-based investment strategy.

• Example 1: Sarah decides to invest in a growth mutual fund. Instead of buying all the shares at once, she signs up for a plan where $200 is automatically deducted from her bank account each month to purchase more fund shares. After five years, she receives a periodic-payment-plan certificate from the fund administrator, consolidating all the shares she acquired through her monthly contributions.

  Explanation: This illustrates the term because Sarah made regular, periodic payments ($200 monthly) into an investment, and the certificate serves as proof of her accumulated ownership in the mutual fund resulting from these ongoing contributions.

• Example 2: Mark's company offers an Employee Stock Purchase Plan (ESPP) where employees can elect to have a percentage of their paycheck withheld each pay period to buy company stock at a discounted rate. Over a six-month "offering period," Mark contributes 5% of his salary. At the end of the period, the accumulated funds are used to buy shares, and he receives a periodic-payment-plan certificate detailing the number of company shares he now owns through this installment method.

  Explanation: Here, Mark's contributions were periodic (each pay period), and the certificate confirms his ownership of company stock acquired specifically through this structured, ongoing payment plan.

• Example 3: A state-sponsored 529 college savings plan allows parents to invest for their children's future education. The plan offers an option to make monthly contributions. The Johnsons choose to contribute $150 every month to their daughter's 529 plan. After several years, they request a statement of ownership, which functions as a periodic-payment-plan certificate, showing the total units or value accumulated from their consistent monthly investments.

  Explanation: This example demonstrates the concept as the Johnsons made regular, periodic payments ($150 monthly) into a savings plan, and the certificate-like statement confirms the accumulated investment resulting from these ongoing contributions.