WHAT ARE SECURITIES?
When we look at the size of Nigeria’s economy and its sizable population it presents an endless development potential for the capital markets.
In this series, we seek to further explain and simplify what securities are and the role they play in the Capital Market.
According to Corporate Finance Institute,
a security is a financial instrument, typically any financial asset that can be traded. The nature of what can and cannot be called a security, generally, depends on the jurisdiction in which the assets are being traded.
According to Akanki O. , securities naturally imply some kind of collateral arrangement where a thing or right is held subject to the fulfillment of a debt.
This definition applies to mortgages and other secured credit transactions. Contrarily, company securities, which are the subject of this discussion, refer to shares or units of investment in a corporate entity.
Contributions to a company’s trading capital made with the intention of generating advantageous returns for the investor are known as company securities.
Further , The Investments and Securities Act 2007,defines securities as:
(a) debentures, stocks or bonds issued or proposed to be issued by a government
(b) debentures, stocks, shares, bonds or notes issued or
proposed to be issued by a body corporate;
(C) any right or option in respect of any such debentures,stocks, shares, bonds or notes; or
(d) commodities futures,contracts,options
and other derivatives, and the term securities in the Act includes those securities in the category of the securities listed in (a)- (d) above which may be transferred by means of any electronic mode approved by the Commission and which
may be deposited, kept or stored with any licensed depository or custodian company as provided under the Act.
A common denominator of the kinds of securities is the ability to earn money or interest on any amount invested .
In this series , we would explore the various kinds of categorizations of securities.
References:
1.Akanki O. The history of company Law (1977-1980) Nig . Journal of contemporary law .
2. Section 315 Act No. 106 of 2007 – Investments and securities Act 2007
3.The CFI team – Corporate Finance Institute – January 21,2022( https://corporatefinanceinstitute.com/resources/knowledge/finance/security/)
Visit our website for more details and follow us on our social media handles for news updates and informative articles.
