Transferable securities definition
Financial instruments which can be freely exchanged between the participants in the capital markets
Transferable securities meaning
Transferable securities are types of financial assets that can be freely exchanged between participants in the capital markets. There are numerous assets classified as transferable securities, such as shares in companies (listed or unlisted), bonds, other forms of secured debt, and some forms of derivatives ( futures, options, swaps).
What are transferable securities?
The Undertakings for Collective Investment in Transferable Securities Directive (UCITS) defines certain criteria for transferable securities. If the securities do not satisfy the criteria they can be classified as non-transferable. An example is a security which cannot be sold to another party.
According to UCITS, transferable securitiesshould adhere to the following criteria:
- The maximum loss which could arise is limited to the sum used for the purchase of the securities
- There is liquidity for the security, and it is not obstructing the UCITS redemption facilities
- There is an accurate assessment of the value, i.e., the price of the security
- An adequate level of information is available
- The securities are negotiable, meaning that they could be traded at the market
- Adequate risk management is set in place, and the associated risks are adequately accounted for.
The (UCITS) directive is a consolidated directive by the European Commission, which defines the rules and regulations for mutual funds in Europe. UCITS funds can conduct their activities in different countries of the European Union and sell shares to investors in other countries.