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What is a Bearer Bond?
Malcolm Tatum
Malcolm Tatum
Sometimes referred to as a coupon bond, the bearer bond operates much like any other sort of bond. What is different is that the bearer bond is almost always an unregistered bond. Also, this type of negotiable bond has a difference when it comes to who received the benefit of the interest and the principal of the bond. Rather than the benefits being paid to the entity that originally purchased the bearer bond, they are paid to the person who is the holder. Here is some information about how the bearer bond works, and why the arrangement may be desirable in some cases.
Bearer bonds are accompanied with a series of coupons that are associated with the bond. Each one of these coupons usually represents a single interest payment that may be collected on the bond. The coupons are usually in the possession of the holder, who is free to present a single coupon periodically. Generally, a coupon may be presented for payment once or twice in a calendar year. The issuer of the bearer bond honors the interest payment and transfers the funds to the holder of the coupon.
As coupon bonds are unregistered bonds, they do not have to follow all the regulations associated with their registered counterparts. However, these negotiable bonds do have to operate within the parameters set down as part of the bond purchase. For example, if the terms of the purchase allow the holder of the bond to cash in a coupon every three months, the issuer is bound to honor that payment schedule.
In other cases, the details of the sale may also allow the holder to not cash in any coupons for a couple of years, and then present three or four at one time. If the terms of the purchase specifically allow for this sort of activity on the part of the holder, then it is possible to present multiple coupons at one time. Generally, however, the holder of a bearer bond can only present one coupon within a specified time frame.
While the bearer bond has been around for a number of years, the concept is beginning to lose some of its appeal. More investors are demonstrating interest in registered bonds as their negotiable bonds of choice. Considered to be a bit more stable and uniform in structure than the bearer bond, investors can manage to make a decent amount of interest from registered bonds, and do not have to be concerned with detailing the terms quite as much. With the unregistered status of the bearer bond, it is possible that this type of bond arrangement may eventually disappear altogether.
Malcolm Tatum
After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including WiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.
Learn more...
Malcolm Tatum
After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including WiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.
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Discussion Comments
My father stole a $5,000,000.00 bearers bond from my mom's parents. My brother stole it during my father's illness. Can I trace it back to my grandfather? I found it after father had mom's parents to his home trying to change her will. I should have taken it and run like hell, but my loving, honest mom believed him when he said it wasn't real. It was.
It was the worst mistake of my life after watching my mother lose so much from a violent, abusive marriage. I do believe my brother stole it after the mysterious death of my father being cared for by the same brother?
Bearer Bonds and Historical Bonds can be traded in an international trade program. AnnM
Found two bearer bonds from Ireland, dating back to the 1940s. Don't know what to do with them or if I could collect any money for them. --TZ
What happens if a bearer bond is stolen? Can it be traced?
how do you typically "cash in" a bearer bond
I have a five dollar bond dated in 1800 from atlantic bank in new york. can you tell me anything about it?
Other than government and legal intervention, what's to prevent someone from copying a bearer bond, using it to settle a transaction, and then cashing the bearer bond himself?
I heard a radio report that 2 Japanese men were trying to board an airplane with Bearer bonds from the U.S. Have you heard this story? The reporter was very upset that this story was not getting serious coverage. What are the implications? Did the men steal the bonds or was something going on illegally with the U.S.? What does this mean financially? Thanks ampay
If bearer bonds are unregistered, doesn't that mean that they are ideal for moving money with criminal intent? Can you simply walk into a bank and cash the bond, or use it to open an account without awkward questions being asked?
Thanks so much for your help.
Depends on where you live and where the company issuing the bond is headquartered or incorporated. There is no unified rule that applies to every part of the world. In the case of the United States, speak with a broker and he or she can give you specifics about current regulations regarding bearer bonds that would apply in different situations.
Are Bearer Bonds or coupon bonds still legal to be issued by corporations today? Is there any kind of filling it has to be done with SEC such an exemption or such?
Thanks so much!
The institution that issued the bearer bond should have a record of the purchase. Depending on where you live, you may simply need to fill out some paperwork in order to get a replacement copy. However, the process can get involved in some places around the world and may require a civil action to obtain a copy of the lost bearer bond. Start with contacting the issuing entity and go from there.
What if the bearer bonds are lost? Can they be re-issued? What options does the owner have?
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