A security is a fungible, tradable financial instrument used to raise capital in private and public markets. Securities consist of equity such as shares, debt such as bonds and commercial paper, and hybrids such as convertible bonds or preferred stock. Public sales of securities are strictly regulated by the U.S. Securities and Exchange Commission (SEC)

Securitization is the process whereby interests in securities are pooled or packaged, underwritten, and sold in the form of asset-backed securities. These securities commonly include real estate mortgages, installment sales contracts, credit card receivables, student loans, leases, and other cash producing investments.

The benefits of asset-backed securities for buyers include diversification and reduced risk. Most buyers are investment companies, retirement funds, hedge funds, insurance companies, and accredited investors.

A Collateralized Mortgage Obligation (CMO) is a mortgage backed security that contains a pool of mortgage loans bundled together and sold as an investment. CMOs are a type of collateralized debt obligation. The pool of loans may be A-paper loans or a lesser quality, including private money loans.

A Collateralized Mortgage Obligation (CMO) is a mortgage-backed security created by pooling together individual mortgage loans and dividing them into different risk and return classes, called tranches. These tranches are designed to offer investors varied cash flow and maturity dates, allowing them to choose investments that align with their objectives including risk tolerance. CMOs facilitate the transfer of risk from lenders to investors, provide liquidity for mortgage lenders, and offer unique investment opportunities in the fixed-income market, though they carry risks like prepayment and interest rate sensitivity.

Regulation D (Reg D) is a Securities and Exchange Commission (SEC) regulation governing private placement exemptions. The regulation permits small companies to raise capital without the need to register the securities with the SEC. However, other regulatory requirements still apply.

Form D is a document that companies must file with the SEC when they sell securities using an exemption under Regulation D.

SEC Rule 144 provides an exemption and permits the public resale of restricted securities if a number of conditions are met, including how long the securities are held, the way in which they are sold , and the amount that can be sold at anyone time.

Stock certificates are physical documents that represent a shareholder's ownership in a corporation. The corporation may be a public or private company. Stock certificates include information, including the number of shares owned, the date the stock certificate was issued, an identification number, sometimes a corporate seal, and an authorized signature which may be an electronic signature. Today, stock certificates are not always used by corporations. Stock ownership may be recorded electronically and maintained by the corporate secretary. The first stock certificates were issued in 1606 by the Dutch East India Company which was a public trading company.

A debenture is an unsecured debt instrument issued by a corporation that relies on the issuer's credit and reputation as opposed to collateral. Debentures are generally issued for ten year terms with interest payments made monthly. Debentures are a type of bond generally issued in $1,000 amounts. Debentures mayor may not be convertible into shares of the company.

A bond is generally a fixed-income security that pays a fixed rate of interest or coupon to its holders until a specified maturity date when the face amount is paid. Bond prices usually increase or decrease in price inversely with interest rates. When interest rates increase, bond prices normally fall, and when interest rates fall, bond prices normally increase. Bonds may be corporate bonds, municipal bonds, government agency bonds, or bonds issued by other levels of government such as the United States Treasury.

Investment Grade Securities

Investment grade securities refer to fixed income bonds with high ratings. This means BBB or higher by Standard & Poors and Fitch, or Baa3 or higher by Moody's. Many investors buy only AM to AA bonds. Below investment grade bonds are high yield bonds, sometimes referred to as junk bonds. These securities pay a far higher yield , but carry a higher risk of default.

Going Private

Going private is the process of converting a public company into a private entity. The method of conversion may include a management buyout, a private equity buyout, or a tender offer. The conversion to a private company is usually the result of determining that being a public company no longer offers significant financial benefits. The conversion removes the company from all SEC reporting requirements and from any listings on public stock exchanges.

Loan Stock

Loan stock refers to common or preferred stock that is used as collateral to secure a loan from a financial institution or other party. The loan can be based upon either a fixed or adjustable interest rate. Lenders usually maintain physical control of the stock until the loan is repaid.

Stock Split

A stock split is an action by the board of directors of a corporation that increases the number of shares by splitting the outstanding stock. This decreases the price per share while increasing liquidity. A stock split has no effect on the total market capitalization of the company or its value. Reverse splits are the opposite.