What is a Face-Amount Certificate Company? A Legal Overview
Definition & Meaning
A face-amount certificate company is a type of investment firm that issues face amount certificates, which are a form of debt security. These certificates promise to pay a specified sum of money to the investor at a future date. Investors can purchase these certificates either as a lump sum or through periodic payments. The certificates are typically backed by assets such as real estate or other securities, providing a level of security for the investment. This type of company operates under the guidelines set forth by the Investment Company Act of 1940.
Legal Use & context
Face-amount certificate companies are primarily relevant in the field of investment law. They are governed by federal regulations that dictate how these companies must operate, ensuring that they provide clear information to investors about the risks and benefits associated with their products. Users may encounter these terms when dealing with investment contracts or securities regulations. Legal templates available through US Legal Forms can assist individuals in understanding or drafting related documents.
Real-world examples
Here are a couple of examples of abatement:
Example 1: An investor purchases a face amount certificate for $10,000, agreeing to pay $1,000 annually for ten years. At the end of the term, the investor receives the full $10,000 as promised.
Example 2: A face-amount certificate company issues a certificate backed by real estate assets, providing investors with a sense of security regarding their investment. (hypothetical example)
Relevant laws & statutes
The primary statute governing face-amount certificate companies is the Investment Company Act of 1940. This act outlines the regulatory framework for investment companies, including the requirements for issuing face amount certificates.