What are transferable securities?
Transferable securities are financial instruments that can be readily exchanged between two parties. Some, such as the Securities Institute of America, say that an asset is not a security if it cannot be transferred and does not involve an element of risk.
Where have you heard about transferable securities?
As an investor, you may have been made aware of the Undertakings for the Collective Investment of Transferable Securities (UCITS) directive from the European Union, which established a standardised investment scheme to allow the free sale and management of mutual funds in Europe.
In July 2014, the EU implemented the UCITS V directive. This protects investors with coordinated regulations for the collective investment in transferable securities.
What you need to know about transferable securities.
The UK Financial Conduct Authority (FCA) defines transferable securities as the following:
- Shares in companies, partnerships or other entities, including depositary receipts in respect of shares
- Bonds or other forms of securitised debt, including depositary receipts in respect of such securities
- Any other securities that allow the buying or selling of said securities or that can be exchanged for a cash settlement
Transferable securities are much freer to move than normal securities, which can be tied up with admin and permissions before they can be transferred. This makes it easier to investors to trade transferable securities.