In business, the settlement of securities is a process in which investments are delivered in exchange for monetary payment. This process is often required to fulfill contractual obligations, for instance those that arise under securities trades.
In the United States, marketable stocks have a settlement date that is often three business days after the execution of the trade. For government securities and listed options, settlements take place one day after execution. Settlement dates differ from region to region. For instance, in Europe, settlements take place two business days following the execution of a trade.
Both parties must deliver on the obligations outlined in the trade. This includes the delivery of both securities and the corresponding payment.
Between trade execution and settlement, there are significant risks for both parties. These are managed by the clearing process, which occurs after a trade is made and before settlement. Clearing involves modifying contractual obligations to ensure the settlement can take place. Common clearing processes include netting, or allowing positive and negative values to either offset or cancel each other out, and novation, a legal process which involves adding or replacing obligations according to the needs of both parties.
Structured settlements are financial or insurance agreements in which a claimant agrees to resolve a personal injury claim through the receipt of regular payments as opposed to a single lump sum. In personal injury cases, these types of settlements can either be offered by the defendant or requested by the plaintiff, but ultimately both parties must agree to the terms.
Structured settlements are often used in product liability and injury cases. They present several advantages. Firstly, they can reduce legal costs for all parties by helping avoid a trial. For the plaintiff, structured settlements may also provide tax benefits, as personal injury settlements are not taxed in the United States. In addition, unlike a lump sum, structured settlements guarantee periodic payments over a fixed period of time. The parties involved may use customized annuities to cover the specific needs of the plaintiff.
A life settlement is the sale of a current life insurance policy to a third party. The policy may be sold for an amount less than its net death benefit but higher than its cash surrender value. Life insurance policy holders may choose to sell for a variety of reasons. Firstly, he or she may no longer want or need the policy. For instance, if the owner wishes to purchase a different type of life insurance policy, or finds that premium payments are no longer affordable, he or she may wish to settle. Policy owners may learn about the process of selling a policy from a financial advisor, lawyer, insurance broker, or acquaintance.
If you’re experiencing financial difficulties, selling annuities or structured settlements may help. People choose to sell annuities to fund college education, start or invest in a business, pay off debt, divorce, invest in property, liquidate a long-term investment, cope with unemployment, or fund a scholarship or endowment.