Registered Security

Definition

A registered security is a type of financial instrument whose owner’s name is recorded on the books of the issuer or the issuer’s designated agent, known as a registrar. This ensures that only the recorded owner can transfer or redeem the security. This is in contrast to bearer securities, where possession of the physical certificate is considered proof of ownership.

Examples

Registered Bond: This type of bond records the bondholder’s name and address on the issuer’s books. Coupons are paid directly to the registered owner.
Equity Stocks: Shares of a company that are recorded in the shareholder’s name and not held in a street name by a stockbroker.

Securities and Exchange Commission Registration

A registered security can also refer to a securities issue that is registered with the Securities and Exchange Commission (SEC). This can involve new issues as well as secondary offerings, thereby complying with regulatory requirements designed to protect investors.

Frequently Asked Questions (FAQs)

What is the main advantage of registering a security?

Registering a security ensures that ownership is clearly documented and transfer can only occur with proper authorization and records. It provides protection against theft, loss, or unauthorized transfer of the security.

How does a registered bond differ from a bearer bond?

In a registered bond, the ownership is recorded with the issuer, and interest payments are made directly to the registered owner. A bearer bond, however, does not record the owner’s information, and whoever holds the physical bond certificate is considered the owner and can claim the interest payments.

What does it mean for a security to be registered with the SEC?

When a security is registered with the SEC, it means the issuer has filed required documents and disclosures that provide investors with essential information about the security’s issuer and terms. This helps to ensure transparency and reduce investment fraud.

Who maintains the records for a registered security?

The records for a registered security are typically maintained by a registrar, who is an agent employed by the issuer to keep track of the owners of the securities.

Can a registered security be converted to a bearer security?

No, a registered security cannot be converted into a bearer security. The two are fundamentally different in terms of ownership records and legal regulations.

Registrar: The entity responsible for keeping records of the securities owners.
Bearer Bond: A bond which does not record the owner’s name and is payable to whoever possesses the physical certificate.
Secondary Offering: The sale of securities by a shareholder of a company after the IPO.
Letter Stock: Securities issued without SEC registration and subject to certain restrictions on resale.
Securities and Exchange Commission (SEC): The U.S. regulatory authority responsible for overseeing securities transactions, activities of financial professionals, and mutual fund trading to prevent fraud and deliberate deception.

Online References

Suggested Books for Further Studies

“The Intelligent Investor” by Benjamin Graham: This book delves into various types of investments including registered securities and how they can be a part of a smart investment strategy.
“Securities Regulation: Cases and Materials” by James D. Cox, Robert W. Hillman, and Donald C. Langevoort: A comprehensive textbook that covers SEC regulations, including registration of securities.
“Investment Securities: A Practical Guide to Documentation and Transactions” by Jeffrey Weaver: This book provides an in-depth look at various types of securities, including registered securities.

Fundamentals of Registered Security: Finance Basics Quiz

### Does a registered security require ownership records to be maintained? - [x] Yes, ownership records need to be maintained. - [ ] No, physical possession implies ownership. - [ ] Ownership records are not relevant. - [ ] Only electronic records are required. > **Explanation:** A registered security has its ownership documented with the issuer or the issuer's agent, ensuring clear ownership records. ### What is a key difference between registered and bearer bonds? - [ ] Registered bonds have higher interest rates. - [x] Registered bonds record the owner's information; bearer bonds do not. - [ ] Bearer bonds are more secure. - [ ] Registered bonds cannot be transferred. > **Explanation:** Registered bonds record the owner's information with the issuer, whereas bearer bonds do not and are payable to the holder of the physical certificate. ### Who typically maintains the records for a registered security? - [ ] The owner. - [ ] The stock market. - [x] The registrar. - [ ] The local bank. > **Explanation:** The registrar, an entity employed by the issuer, maintains records of the ownership of registered securities. ### How does registering securities with the SEC benefit investors? - [ ] It decreases the security's value. - [x] It provides essential information and transparency. - [ ] It simplifies buying process. - [ ] It ensures higher returns. > **Explanation:** Registering securities with the SEC provides transparency and essential information about the issuer, which helps protect investors from fraud and deception. ### Can anyone convert their shares from registered to bearer form? - [ ] Yes, it is always possible. - [ ] Only under specific conditions. - [x] No, it is not possible. - [ ] It requires SEC approval. > **Explanation:** Registered securities and bearer securities follow different regulatory and documentation structures and cannot be converted interchangeably. ### What is the role of a registrar in the context of registered securities? - [x] Keeping track of the owners of the securities. - [ ] Issuing new securities. - [ ] Determining the price of the securities. - [ ] Handling the investments. > **Explanation:** The registrar is responsible for keeping detailed records of the ownership of registered securities. ### How do interest payments differ between registered and bearer bonds? - [ ] They are the same for both. - [ ] No direct interest payment is made to the owner. - [x] Interest is paid directly to the registered owner in a registered bond. - [ ] Bearer bonds pay interest to a proxy. > **Explanation:** Interest from registered bonds is paid directly to the recorded owner, whereas bearer bonds pay interest to whoever presents the bond. ### Which organization oversees the registration of new securities in the U.S.? - [ ] Federal Reserve - [ ] Department of Commerce - [x] SEC (Securities and Exchange Commission) - [ ] Internal Revenue Service (IRS) > **Explanation:** The Securities and Exchange Commission (SEC) is the regulatory authority that oversees new securities registration to ensure compliance and protect investors. ### What happens to the value of a registered security if physical certificates are lost? - [ ] The value is lost. - [x] Ownership is retained as it is recorded with the registrar. - [ ] It depends on the company's policy. - [ ] The value is halved. > **Explanation:** Because ownership is recorded with the registrar, losing physical certificates does not affect the value or ownership of registered securities. ### What is required for the transfer of ownership of a registered security? - [ ] A written agreement between old and new owner. - [x] Proper documentation and update of the registrar’s records. - [ ] Approval from the SEC. - [ ] Public announcement. > **Explanation:** Ownership transfer of registered securities requires proper documentation and updating records with the registrar.

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