What is it?
The CUSIP is an identification standard used in securities law and commercial contracts to specify the exact financial instrument being traded or pledged.
cusip
SecuritiesLegal glossary term
Quick answer
CUSIP usually means a nine‑character code that uniquely identifies a security. In contracts, it matters because an incorrect code can invalidate a pledge or sale. Before signing, verify the CUSIP against the issuer’s official listing.
Definitions
What is cusip?
Legal Definition
A CUSIP is a nine‑character alphanumeric code that uniquely identifies a specific North American security, such as a corporate bond or stock. Including the correct CUSIP in a contract triggers the parties' obligations to refer precisely to that security, avoiding misdelivery or mistaken claims. The first six characters denote the issuer, the next two the issue, and the final character is a check digit.
Plain-English Translation
Think of a CUSIP like a library barcode that tells the librarian exactly which book you borrowed, so the right title gets returned to the right shelf.
Contract relevance
Why cusip matters in contracts
Misstating or omitting a CUSIP can void a security transfer and leave the seller liable for loss; the counter‑party bears the risk of an inaccurate identifier.
Document context
Where cusip appears in documents
| Document type | Section | Why it matters |
|---|---|---|
| Security agreement | Definitions section | Ensures the pledged asset is precisely described |
| ISDA Master Agreement | Schedule of Collateral | Links each posted security to its identifier |
| Form 8‑K filing | Exhibit 1 | Discloses the exact securities issued |
| UCC‑Article 9 financing statement | Collateral description | Provides the identifier for public filing |
Contract language
Common contract wording
| Contract wording | Plain-English meaning | What to check |
|---|---|---|
| "The Borrower hereby pledges the securities identified by CUSIP _______" | Specifies which securities serve as collateral | Confirm the code matches the intended issue |
| "Seller shall deliver to Buyer the shares bearing CUSIP _______" | Directs transfer of a particular stock | Verify the ticker and CUSIP correspond |
| "All references to the Bonds shall mean those with CUSIP _______" | Limits the contract to a single bond issue | Check for typographical errors |
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
Obtain the exact nine‑character CUSIP from the issuer or a trusted data source
2
Confirm the CUSIP matches the intended security issue and series
3
Run a checksum to verify the final digit
4
Ensure the CUSIP appears in every relevant contract schedule
5
Cross‑check the CUSIP against the depository’s records
6
Ask for a copy of the security’s prospectus or offering memorandum
7
Verify that any amendments also update the CUSIP where needed
Party impact
How cusip affects each party
| Party | What this party should check |
|---|---|
| Lender | Must confirm the CUSIP to secure a valid lien on the pledged security |
| Borrower | Needs to ensure the correct CUSIP to avoid unintended collateralization |
| Seller | Must list the accurate CUSIP to guarantee transfer of the intended shares |
| Buyer | Should verify the CUSIP to prevent receiving the wrong security |
Comparison
cusip vs similar terms
| Related term | Plain meaning | Main difference from cusip |
|---|---|---|
| ISIN | International securities identifier | ISIN is 12 characters and used globally, while CUSIP is nine characters for U.S. and Canadian issues |
| Ticker symbol | Market trading shorthand | Ticker can change after corporate actions; CUSIP remains constant |
| SEDOL | UK securities identifier | SEDOL is six characters and used mainly in the UK, whereas CUSIP covers North America |
Missing or vague
If cusip is missing or vague
If a contract omits a CUSIP, parties may dispute which exact security was intended, leading to litigation over collateral ownership. Ambiguous identifiers can cause a lender’s security interest to be deemed unenforceable, exposing the borrower to default. Courts will look to extrinsic evidence, but the process is costly and time‑consuming.
A vague reference may also trigger a breach claim if the wrong issue is delivered, forcing the seller to repurchase or compensate the buyer.
Document map
Document section map
| Contract section | What to inspect |
|---|---|
| Definitions | Look for the CUSIP definition and any cross‑references |
| Collateral Description | Verify the full nine‑character code is listed |
| Representations & Warranties | Check that the security is accurately identified |
| Closing Conditions | Ensure delivery of a CUSIP‑matched security before funding |
| Amendments | Confirm any changes update the CUSIP throughout the agreement |
Visual model
Understand cusip fast
An explainer image has not been generated for this term yet.
01
A bank lender requires the borrower’s corporate bond CUSIP 037833100 before approving a $5 million loan.
02
An issuer’s prospectus lists CUSIP 594918104 for each tranche of its new senior notes, guiding investors to the correct issue.
03
A franchisee includes the franchisor’s common stock CUSIP 931142103 in the purchase agreement to lock in the exact equity share.
Document context
How cusip shows up in legal documents
Why does it matter?
Misstating or omitting a CUSIP can void a security transfer and leave the seller liable for loss; the counter‑party bears the risk of an inaccurate identifier.
When does it matter?
When a security is pledged as collateral in a loan agreement, the lender must obtain the correct CUSIP within five business days of execution.
Where is it usually seen?
CUSIPs appear in UCC‑Article 9 security agreements, ISDA master agreements, and SEC filing forms such as Form 8‑K.
Who is affected?
The lender obtains a precise claim on the pledged asset, while the borrower risks a default claim if the CUSIP is wrong.
How does it work?
First, the parties locate the security’s CUSIP on the issuer’s website or through a data vendor. Then they insert the code into the collateral schedule of the security agreement. Within three days, the lender verifies the identifier against the depository’s records.
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External reference for cusip
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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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