A Security is a financial instrument representing a legal agreement, document or certification that has intrinsic monetary value. A Security is typically traded on an Exchange, and common examples of securities include stocks and bonds. However, the official definition of Security is much more detailed. In fact, as shown by the following summary, the best way to describe a Security is to first describe what is not a Security.


  • Non-securities

    • Things of Value (e.g. Racehorse, Collectibles like art)

    • Commodity Futures (single-stock futures are securities as are options on futures)

    • Annuities & Life Insurance, excluding the “variable” flavors

  • Securities

    • Interest in Things of Value

    • Share of profits derived from the efforts of others

    • Everything else other than Non-securities


While Securities are subject to fraud rules, Non-securities are NOT subject to fraud rules, and they are not subject to anything under Uniform Securities Act.

As shown by the following summary, Securities can be categorized as Exempt and Non-exempt Securities.

  • Exempt Securities

    • Government & municipal issuers

    • Issuers regulated under other laws (e.g. railroads, public utilities)

    • Federal-covered security (e.g. Securities listed on exchanges)

    • Non-profit securities (e.g. often bonds of religious/church, educational, etc.)

    • Securities maturing under 270 days (money markets, commercial paper, etc.)

    • Investment contract issued in connection with pension/employee benefit program

  • Non-exempt Securities

    • Everything else that is a Security but does not meet the exemption criteria

    • Must register at the state-level

Exempt Transactions are the only way to sell an unregistered, Non-exempt Security. Essentially, Exempt Transactions include transactions that do not involve the general public. Hedge funds and private equity funds are common examples of Securities that are Non-exempt and that fall under Exempt Transactions.

In summary, here is an overview of the most common types of each security and transaction category:

  • Non-securities – Annuities & Life Insurance, excluding the “variable” flavors

  • Securities

    • Exempt Securities – Treasuries & Munis and stocks & bonds, listed on exchanges (see Financial Markets)

    • Non-exempt Securities

      • Exempt Transactions – Private Investment Vehicles (e.g. hedge funds, private equity funds, private placements, etc.)



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