What is it?
This term functions as a statutory identifier within securities regulation, governing the precise tracking and exchange of marketable financial instruments.
cusip
SecuritiesLegal glossary term
Quick answer
A CUSIP usually means a unique nine-character code identifying North American securities. In contracts, it matters because it precisely specifies which stock or bond is being traded or referenced. Before signing, check that the CUSIP matches the security's ISIN.
Definitions
What is cusip?
Legal Definition
A CUSIP is a unique nine-character alphanumeric code that identifies specific North American securities. This standardized identifier allows brokers, custodians, and clearing corporations to track ownership and trade settlement efficiently across various markets. Practitioners pay close attention to whether the CUSIP aligns with the issuer's ISIN or SEDOL for jurisdictional certainty.
Plain-English Translation
A CUSIP is like a unique ID number on your favorite toy. It lets everyone know exactly which specific toy you own, even if it looks similar to others in the box.
Contract relevance
Why cusip matters in contracts
Misapplying or omitting a correct CUSIP can cause trade settlement failures, leading directly to failed deliveries or operational losses for the broker or investor.
Document context
Where cusip appears in documents
| Document type | Section | Why it matters |
|---|---|---|
| Security Purchase Agreement | Article II, Section 3 | Establishes exactly what asset is being bought and sold. |
| Investment Trust Indenture | Schedule A (List of Securities) | Provides the master list against which all trades are validated. |
| Loan Covenant Document | Exhibit B | Defines the specific bond or equity tranche secured by the loan. |
| Settlement Confirmation Notice | Trade Details Field | Confirms the precise identifier used for clearing and settlement purposes. |
Contract language
Common contract wording
| Contract wording | Plain-English meaning | What to check |
|---|---|---|
| The security identified by CUSIP 123456789 shall be purchased... | This means we are buying this exact stock or bond. | Ensure the code matches your brokerage statement. |
| All obligations hereunder relate to the asset bearing CUSIP: XYZ0000A | We are legally bound concerning this specific security identifier. | Verify that 'XYZ' refers to the correct issuer. |
| The agreed-upon collateral shall be defined by its CUSIP listing. | The underlying asset is locked down using this unique code. | Confirm the code is listed in an appendix or schedule. |
Red flags
Red flags to watch for
Wording examples
Clearer wording examples
Vague wording
"Securities identified by CUSIP"
Clearer wording
"Specific securities identified by the nine‑character CUSIP code"
Vague wording
"Shares with ticker XYZ"
Clearer wording
"Shares of XYZ Corp identified by CUSIP 123456789"
Note: “clearer” means easier to read — not legally reviewed or guaranteed safe.
Pre-signature checklist
What to check before signing
1
Does the CUSIP match the security listed on your brokerage statement?
2
Is the code nine characters long and alphanumeric?
3
If international, does this CUSIP align with the corresponding ISIN?
4
Are there multiple CUSIPs referenced for one asset (e.g., different classes)?
5
Is the CUSIP explicitly defined in the Definitions section?
6
Does the contract specify which jurisdiction's standard applies to this code?
Party impact
How cusip affects each party
| Party | What this party should check |
|---|---|
| Buyer | Must verify the CUSIP matches their intended purchase before committing funds. |
| Seller | Should ensure the CUSIP listed corresponds exactly to the security they are legally obligated to deliver. |
| Lender/Creditor | Needs this for collateral perfection; it proves *which* bond is backing the loan. |
| Custodian | Uses this code internally to track ownership and prevent settlement errors. |
Comparison
cusip vs similar terms
| Related term | Plain meaning | Main difference from cusip |
|---|---|---|
| ISIN (International Securities Identification Number) | A globally recognized alphanumeric code, often used internationally. | CUSIP is primarily North American; ISIN incorporates country codes for broader use. |
| Ticker Symbol (e.g., MSFT) | The short abbreviation used on exchanges to trade the security quickly. | Tickers can be ambiguous; they are shorthand representations of the full CUSIP identifier. |
| SEDOL (Stock Exchange Daily Official List) | A code specific to the London Stock Exchange, though widely adopted globally. | SEDOL is jurisdiction-specific while CUSIP has a stronger North American focus. |
Missing or vague
If cusip is missing or vague
If a contract fails to define the security via a precise CUSIP, disputes can arise over which exact share class or bond tranche is being referenced.
Ambiguity becomes rampant when only using a common ticker symbol; for example, 'A' shares versus 'B' shares might both trade under AAPL but have different CUSIPs.
Without this identifier, settlement agents face uncertainty about the precise asset to deliver, leading to delays and potential claim rejections.
Document map
Document section map
| Contract section | What to inspect |
|---|---|
| Definitions | Inspect how 'CUSIP,' 'Security Identifier,' or similar terms are formally defined. |
| Purchase/Sale Clauses | Verify that the CUSIP is explicitly listed next to the security name in the transaction details. |
| Collateral & Security Pledge | Check if the contract mandates using a specific CUSIP for collateral valuation. |
| Governing Law Provisions | Sometimes, this section dictates whether US (CUSIP) or International (ISIN) standards apply. |
Visual model
Understand cusip fast
An explainer image has not been generated for this term yet.
01
A pension fund manager purchases 500 shares using CUSIP 912828F10
02
A broker executes a trade for municipal bonds identified by CUSIP 73916Q45X
03
An individual receives a dividend payment linked to holdings listed under CUSIP 84371W22Z
Document context
How cusip shows up in legal documents
Why does it matter?
Misapplying or omitting a correct CUSIP can cause trade settlement failures, leading directly to failed deliveries or operational losses for the broker or investor.
When does it matter?
The CUSIP becomes mandatory when a security is initially issued into the public market, triggering its registration in the Depository Trust Company (DTC).
Where is it usually seen?
You find this code printed on bond certificates and statements, most commonly within standard purchase orders under Article 3 of the UCC.
Who is affected?
The custodian gains accurate ownership records when they hold securities identified by a CUSIP; the investor risks incorrect dividend payments if their holdings are miscoded.
How does it work?
First, the issuer registers the security with the DTC. Then, the DTC assigns the unique nine-character code. Finally, this code is affixed to all transaction documents, ensuring consistent identification throughout the life of the bond or stock.
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Wikipedia
CUSIP
A CUSIP () is a nine-character numeric or alphanumeric code that uniquely identifies a North American financial security for the purposes of facilitating clearing and settlement of trades. All CUSIP identifiers are fungible, which means that a unique CUSIP...
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Where cusip connects to real contract work
This layer links the term to nearby glossary entries, document use cases, and contract-risk guides so readers can move from definition to context without dead ends.
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Source & disclosure
This page is an AI-assisted plain-English explanation based on LexPredict Legal Dictionary context and contract-review patterns. It is not legal advice. Meaning may vary by jurisdiction, industry, and exact clause wording.
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