Bearer bond

A bearer bond is different from normal stock in that it is unregistered – no records are kept of the owner, or the transactions involving ownership. Whoever physically holds the bearer bond papers owns the stock or corporation. This is useful for investors and corporate officers who wish to retain anonymity. The downside is that in the event of loss or theft, bearer bonds are extremely difficult to recover.

History

The bearer bond most possibly has its origins in the post Civil War United States. In many respects the Reconstruction (1865–1885) was funded on these bonds. Their use in avoiding taxation became more popular after World War I. Europe and the remainder of the Americas adapted the use of these bonds in their own finance systems for similar reasons of utility.

A bearer bond or bearer security is a certificate that represents a bond obligation of, or stock in, a corporation or other intangible property. It has been illegal since 1982 to issue bearer bonds in the municipal or corporate bond markets in the United States. Wyoming and Nevada still allow them, but their typical uses of shifting ownership to avoid legal obligations run afoul of tax rules.

Geographical popularity

In Central America, this is typically the standard procedure for owning and running companies.Bearer bonds have been used in this region in this way for a very long time, and their use has had very little to do with the privacy and taxation benefits that come from using them.

Usage

While bearer instruments are rarely created as such, a holder of commercial paper with the holder designated as payee can change the instrument to a bearer certificate by an endorsement. In most of the United States, this has been codified in Article 3, Part 2 of the Uniform Commercial Code.

The proper holder simply signs the back of the instrument and the instrument becomes bearer paper. This is most often done with negotiable instruments such as promissory notes or checks.

Alternately, an individual or company may write a check payable to "Cash" or "Bearer" and create a bearer instrument. Great care should be taken with the security of the instrument, as it is legally almost as good as cash. Though in recent years, third party checks are not being honored by most banks unless the original payee has signed a notarized document stating such.

Bearer bonds in popular culture

Since bearer bonds can have extremely high values, a physically manageable number of them can represent a huge amount of cash. In many movies, a hunt for a very large sum of money (e.g., $10 million) is often used to make plausible the outrageous activity required of the characters (see also McGuffin). In paper currency, this would be a very unwieldy object comprising several suitcases. However, if bearer bonds are introduced to the plot, this sum can be represented in a small, convenient package. Several popular films and television series that feature bearer bonds in this role include the films "Goldfinger," "The Da Vinci Code", "Beverly Hills Cop", "Die Hard", "Panic Room", "Heat", "Formula 51", "Mission Impossible" and the TV series "24" and "Monk".