Definition of a Security Holder

A security holder is essentially anyone who owns an interest in an organization. This can be a debt or equity -- both mean that the holder has an interest in the organization's financial well-being.

A good example of a debt security is a bond. These are instruments that organizations issue to raise money; in exchange for money in the present, they agree to pay it back, with interest, at a point in the future. The bond owner is a security holder because if the company fails, he will lose his investment.

Stock is another form of a security. Rather than being debt like bonds, stocks represent equity -- a share of profits and some control of the company. Stockholders are security holders because they profit when the company profits.

Security holders are significant because they have vested interests in organizations. This is particularly true if someone owns a majority of an organization's securities; that organization therefore depends on that person, but the person also depends on the organization. It is important to know how many security holders an organization has and what proportion of the securities they own before you invest because the parties can play major roles in the organization.