Security
An asset or assets to which a lender can have recourse if the borrower defaults on any loan repayments. In the case of loans by banks and other moneylenders, the security is sometimes referred to as collateral. A financial asset, including shares, government stocks, debentures, bonds, unit trusts, and rights to money lent or deposited. It does not, however, include insurance policies [Law, p. 318-319]. A tradable legal claim upon, or interest in, the assets of a borrower may be in a bearer or registered form. Also used to describe a right of recourse or claim on a borrower's assets in the case of default [Doyle, p. 322]. An asset pledged to raise a loan, in default of repayment of the amount borrowed, together with interest. A mortgage or chattel security secures the performance of a loan by pledging land or goods. The term charge applies to the payment obligation on any asset offered as security. See also collateral; negative pledge. In an investment context, a device allows fractional ownership or other rights to be pooled and traded as asset-backed securities [Mann, p. 329]. Irredeemable security. A security with no redemption date. Interest on irredeemable security is payable forever, but the original sum borrowed is never repaid [Black, Hashimzade, Myles, p. 312]. Redeemable security. A security that the borrower is due to redeem at some date. This is contrasted with irredeemable security, where the borrower has no obligation to repay the loan [Black, Hashimzade, Myles, p. 315]. Bearer security. A security for which the only proof of ownership is possession of the security certificate; this enables bearer bonds and shares to be transferred from one person to another without registration. This is highly unusual as most securities are traded electronically with automatic digital registration. Moreover, many jurisdictions have clamped down on bearer securities as anonymity makes them a perfect vehicle for tax evasion and other illegal activities [Law, p. 45].
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Law, J. (2016). A Dictionary of Business and Management (6 ed.) Oxford: Oxford University Press.
Black, J., Hashimzade, N., Myles, G. (2017). A Dictionary of Economics (5 ed.) Oxford: Oxford University Press.
Doyle, C. (2016). A Dictionary of Marketing (4 ed.) Oxford: Oxford University Press.
Mann, T. (Ed.) (2017). Australian Law Dictionary. Oxford: Oxford University Press.