What Constitutes a 'Security'?

The definition of what constitutes a “security” has broadened and changed dramatically over the years under both case and statutory law. Attorneys concentrating in securities law (whether by virtue of litigation or transactional work), as well as governmental and self-regulatory organizations, ranging from the Securities and Exchange Commission (SEC) to the National Association of Securities Dealers (NASD) to various exchanges, have been dealing with the increasingly complex question of what constitutes a “security.” This question is often posed to resolve particular claims in specialized venues, testing the acumen of even the most sophisticated securities practitioners and industry members. Securities can range from simple stock certificates, to grants, to options, to warrants, to stock indices, to certain partnership interests. The list of “securities” is extensive, growing, and in a state of perpetual flux and litigation. No wonder, then, that most matrimonial practitioners lacking expertise in this arcane field can run into significant difficulties and delays in arranging for the equitable distribution of assets that may well be considered “securities” by the relevant financial institutions, their counsel and/or their in-house compliance staff, even when the matrimonial practitioner is not at all certain that those assets are indeed “securities.” This two-part article describes the transfer process and offers sample forms as examples.