Commonly Used Terms
Affidavit of Loss - A sworn statement in writing whereby the affiant attests to certain facts regarding the lost instrument including its description, the date of issuance, the date of loss and how it was lost and ensures that the instrument has not been endorsed or hypothecated in any way as to make it readily negotiable. The affidavit also states that if the original certificate is ever found it shall be promptly forwarded to the surety company for proper disposition. The affiant duly swears that the information contained in the affidavit is true and correct to the best of their knowledge. The affidavit must be notarized.
Beneficiary - Sometimes called the obligee, is the party in the surety contract who is secured against loss and to which the principal (obligor) and surety (the insurance company) are bound. In a Lost Instrument Bond form the beneficiary is typically the transfer agent and/or the issuer of the stock or bond certificate.
Hypothecate - To pledge or subject property to liability for a debt without delivery of possession or transfer of title.
Indemnify - An agreement whereby the principal and/or others agree to make reimbursement to the surety for any loss the surety may incur under the bond.
Legal Transfer - A transfer of securities that requires special documentation. A legal transfer typically involves a minor child, the settlement of an estate of a deceased shareowner, trust accounts or the holdings of a corporation.
Lost Instrument Surety Bond - A surety bond which is required by the transfer agent to effect the replacement of a lost stock or bond certificate. The lost instrument surety bond provides indemnification (the promise to reimburse or make whole) to the transfer agent in the event the original certificate is found or surfaces and is sold, traded or transferred in a manner which causes financial loss to the transfer agent or issuer of the certificate. Also referred to as lost securities bond, lost document bond, and indemnity bond.
Medallion Stamp Program - Provides a special signature guarantee that is required by the transfer agent. This signature guarantee is given by many financial institutions such as commercial banks and brokerage firms that are members of the Securities Transfer Agents and Stock Exchange Medallion Programs. The Medallion Program is not a notarization. (Also referred to as Medallion Guarantee)
Obligee - The party to whom a bond is given. The party protected by the bond against loss. An obligee may be a person, form, corporation, government or a government agency. In a lost instrument bond form the obligee is the transfer agent and/or the issuer of the stock or bond certificate.
Obligor - Usually called the principal, or one bound by the obligation. In a lost instrument bond the lost certificate holder is the obligor in the surety contract who is bound with the surety to guarantee the obligee (transfer agent and/or the issuer of the stock or bond) against loss.
Principal – The one who is primarily bound on a bond furnished by a surety company. Sometimes called the obligor. In a lost instrument bond the lost certificate holder is the principal in the surety contract who is bound with the surety to guarantee the obligee (transfer agent and/or the issuer of the stock or bond) against loss.
Stock/Bond Power - A form which instructs the transfer of ownership of a security, (stock or fixed income bond), from the registered owner(s) to a third party. It is necessary to complete a power when the reverse of the certificate is not available or cannot be used. All shareowner(s) signatures must appear on the power and it must be Medallion Guaranteed.
Substitute W-9 Form - A Federal Government tax filing document which certifies your correct social security or taxpayer identification number and also certifies that you are not subject to federal backup withholding.
Surety Bond - A contract, usually a three party agreement, taking the form of a joint and several bond whereby one party, the Surety, is bound with the person bonded, called the Principal or Obligor, to a third party, commonly called the Beneficiary or Obligee.
Surety Company - The surety is usually an insurance company and is the party in the Surety Bond contract who guarantees the faith of another party. The surety likewise is collaterally liable for payment of money on behalf of or performance by that party.