The term security in typical usage denotes safety; nevertheless in financial parlance the term is required to describe a tradable financial possession. In fact this term signifies any sort of financial instrument currently offered on the planet.
Securities are more categorized as either:
An equity security might be defined as a share of equity interest in an entity such as the stock of a restricted business. The holder of such equity stock is referred to as a “investor” i.e. somebody who holds a small part or “share” of the company that has provided the instrument. As a share holder, he gets a minimal control over the business that is equal to the portion of the share he holds.
For example, if an individual has a 51% share in XYZ Business then he would be said to have “Controlling Interest” in the company and might employ and fire its management (subject to the rules and regulations as laid down by both business in addition to the law of the land.) As part owner (despite how huge or small his share might be) he is entitled to earnings which might be delivered to him as dividends or through capital gains i.e. if he sells the shares at a rate higher than his purchase rate.
Debt or fixed earnings securities
These include both debentures as well as bonds and are dept instruments that are easily bought and sold by two parties. Unlike Equity, a debt instrument does not provide the instrument holder any rights to the ownership of the company however it’s merely a loan that the purchaser has offered to the company. And as such the purchaser is just entitled to the initial principal amount in addition to the (predetermined) interest accrued on the instrument.
The sale of financial securities to possible financiers is one of the most important methods that publicly-traded business build up capital for their day to day operations along with capital financial investments.
Securities and exchange commissions
In a lot of countries of the world the purchasing and selling in financial securities is managed and controlled by “securities and exchange commissions” who are responsible for supervising financial securities transactions not just through designated exchanges however by also regulating shared fund business who buy monetary products on behalf of their investors, for a pre-determined charge.
These “commissions” are accountable for the avoidance of unfaithful, deliberate fraud in addition to deceptiveness in the securities markets under their jurisdiction. Their primary aim is to protect the interests of the financiers and to help foster financial growth through the financial sector.
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