Encumbered securities are securities that are held as collateral by a lender. The lender may be a bank, broker-dealer, or other financial institution. The borrower is typically required to post collateral in order to secure a loan. The collateral may be in the form of cash, securities, or other assets.
Encumbered securities may be subject to restrictions on their use. For example, the borrower may be restricted from selling or pledging the securities as collateral for another loan. The restrictions on the use of encumbered securities protect the lender's interest in the collateral.
Encumbered securities may also be referred to as pledged securities.
What are encumbered investments?
An encumbered investment is an investment that has been pledged as collateral for a loan. This means that if the borrower defaults on the loan, the lender can seize the investment to recoup its losses.
Encumbered investments can be more risky than unencumbered investments because there is a greater chance that the borrower will default on the loan and the lender will seize the investment. However, encumbered investments can also offer higher returns than unencumbered investments, making them attractive to investors seeking to maximize their returns. What is the legal term of encumbrance? The legal term of encumbrance typically refers to any type of legal claim or burden that might be placed on a piece of property. This could include things like mortgages, liens, or easements.
What does encumbered mean in shares? The term encumbered in relation to shares means that the shares are subject to a legal or financial claim or restriction of some kind. This could mean that the shares are pledged as collateral for a loan, or that they are subject to a legal dispute. In either case, the shares may be difficult to sell or transfer without first resolving the encumbrance. What is unencumbered stock? Unencumbered stock is stock that is not pledged as collateral for a loan. When a company pledges stock as collateral, it is said to be "encumbered." The term is also used to describe stock that is not subject to any legal claims or liens. Does the word encumbrance mean? encumbrance
noun
1. a burden, weight, or impediment, especially a financial one:
The company's debt is a serious encumbrance on its operations.
2. the state or condition of being encumbered:
The house is for sale, encumbrance free.