Subordinate investment vehicle, like a bond, debenture, stock share, whose claims and rights are subordinate or secondary to senior, primary investment vehicles. These claims and rights involve the assets and earnings of the issuer for the payment of dividend, interest, and principal. Senior securities holders are paid before the subordinates. For example, common stock (ordinary shares) is subordinate to preferred stock / preference shares, which are subordinate to debentures (unsecured bonds), which are subordinate to mortgage or secured bonds. In a issuing firm’s liquidation, a liquidator must first pay mortgage bonds, ordinary stock last. Also known as subordinated debenture or subordinated security.

More On This Topic

Link to This Definition
Did you find this definition of JUNIOR SECURITY helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary