Bearer Instrument

A bearer instrument is a fixed-income security that was issued as a bearer security.

Securities can be issued as registered, or bearer. Most are registered, meaning that the business that sells the security keeps track of it (puts it in the registry, in other words).

But with the bearer form, there is no record of who owns the security, and whoever has the certificate in hand is assumed to be the owner and entitled to the payments. The difference in issuance style is important, because with no record of it on file with the issuing business, the transfer tax when the security is sold or inherited would not apply. Plus, it makes it much more crucial to have the physical certificate.

For example, let's say you buy some registered shares. If you lose the certificate or receipt, you'll still be able to draw payments, because the company registered you as the owner. But let's say you buy those same shares issued as bearer. If you lose the documentation, there really isn't a way to prove to the business you bought shares, i.e...that you own any of them.