Loss securities bonds (also known as lost instrument bonds) are a special type of surety bond that are designed to provide protection for publicly traded companies who sell stock investments in their business. If you are purchasing stock in a company and need to obtain a loss securities bond, there are a few things you should know first.
What Loss Securities Bonds Cover
Loss securities bonds cover a company financially should the documents (stocks, etc.) that have been purchased become lost, stolen, misplaced, etc. When you purchase stock in a company and receive a stock certificate, this physical piece of paper (a legal document) certifies that you own a certain number of shares in a company. It also states the date that they were purchased and an identification number and usually also has the corporate seal and signatures on them.
The reason some people must obtain a loss securities bond is for the protection of the company whose stock the investor owns. Loss securities bonds are there to provide financial protection against fraud and other abuses. In this case, it would protect the company who cashes out stock certificates from having a person say they lost their certificate, be provided another one, and then try to cash in both the new certificate and the one that was “lost”.
When You Should Obtain a Loss Securities Bond
There are many instances when a person should obtain a loss securities bond. One major scenario deals with personal representatives. If you are a personal representative for a person and are trying to liquidate the assets of an estate out to recipients, you may be required to obtain a loss securities bond.
If you set out to obtain a loss securities bond for a scenario like this, make sure to check with the courts or an attorney to ensure that you have the right and cause to obtain a bond.
Classifications of Loss Securities Bonds
Loss securities bonds can be classified as fixed or open penalty. Fixed penalty loss securities bonds are required for cases that deal with certified checks, certificates of deposit (CDs) and other certificates that have a fixed value. Open penalty loss security bonds are for cases where the certificate’s value is dependent on market fluctuations. There is no specific set value for the stock certificate’s price.
How to Obtain a Loss Securities Bond
Before you set out to obtain a loss securities bond, make sure you understand what it is that you are applying for. You should also understand the best way to go about obtaining a bond. If you have any questions about the process or what the bond will cover, contact The Patrick J. Thomas Agency today.
Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.