DEFINITION of 'Covered Security'

A class of securities, created by the National Securities Market Improvement Act, that enjoys federally imposed exemptions from state restrictions and regulations. Most stocks trading in the U.S. are covered securities.

Also known as a "federal covered security".

BREAKING DOWN 'Covered Security'

Covered securities were developed to standardize security regulations and filings across the United States. Rather than having individual companies register, file and comply with the differing regulations in all the states, a uniform set of rules was created.

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