Lost Security Bonds (also called Lost Instrument Surety Bonds or Lost Cashier's Check Bond) are required to receive payment or replacement for a lost, destroyed, stolen or misplaced stock certificate, bond certificate or cashier's check. The surety bond acts as a mechanism to protect a bank or other transfer agent from a financial loss in the event the original instrument is found and sold or transferred by an unauthorized third party.
Lost Security Bonds can be classified as either "fixed" penalty or "open" penalty. Fixed penalty bonds are required in cases where the lost items are certified checks, certificates of deposit, or any other instruments with fixed values. Open Penalty bonds are required when the items lost are stock certificates or other instruments where the market value fluctuates.
