Equity Security

Definition:

A security that denotes and measures ownership in the equity of an entity. Investors share in the profits of the entity in which they have equity shares through dividends and the potential to realize a gain on the sale of the securities themselves. Additionally, equity holders have a right to a share of an entity’s property on returns of capital and on Bankruptcy, once all creditors have been paid. The term also includes any security that is convertible into such a security or carrying any Warrant or right to subscribe to or purchase such a security or any such Warrant or right. An equity security is defined in Section 3(a)(11) of the Exchange Act.

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