A “security” generally refers to a financial instrument or an interest in a financial asset issued by another – typically a company. This can take the form of an equity (e.g., a residual or profit sharing) interest in a company or an interest in the debt of a company. Securities can take other forms too, such as an investment contract. The nature of what is and is not a security generally depends on its characteristics and investors’ expectations in holding the asset as set by actions and promises of the company issuing it (as opposed to what it is called), as well as the jurisdiction in which the asset is regulated.
Contrast this with the definition of a “commodity,” which includes, among other things, physical commodities, such as agricultural products or natural resources, as opposed to financial instruments like currencies.
Interested to read about different types of securities offerings? Visit our securities page to learn more.