Covered security

In U.S. law, a covered security may refer to two categories of securities:

• Under The National Securities Markets Improvement Act of 1996, is a security listed on the NYSE, AMEX, Midwest (Chicago), or NASDAQ Global Market or any security senior to (bond or preferred) or equal to (rights and warrants). These securities are exempt from registration and advertising filing requirements of the Uniform Securities Act but are not exempt from any anti-fraud provisions.
• In U.S. Federal income tax law, a covered security is one for the sale of which the broker must report, to the Internal Revenue Service, the customer's basis and information on whether the sale results in a short-term or long-term gain or loss. This rule applies to certain types of securities, acquired after a specified effective date. The law phases in between January 1, 2011 and January 1, 2013 (or later).[1]

The latter category was created in an amendment to section 6045 of the Internal Revenue Code in Section 403 of the Energy Improvement and Extension Act of 2008 (Public Law 110-343, division B). The law refers to any security in this category as "specified security", and defines such securities to include stock in a corporation, notes, bonds, debentures and other evidence of indebtedness, commodities, commodity contracts or derivatives, and any other financial instrument for which the Secretary of the Treasury or his delegate determines that the reporting of adjusted basis is appropriate. Information is reportable if the security is acquired after a certain effective date (with some exceptions, January 1, 2011).[2]