CUSIP Distribution Agreement: A Comprehensive Guide for Investors

As an investor, you may have come across the term CUSIP and wondered what it means. A CUSIP is a unique identifier assigned to a security, such as a stock or bond, traded in the United States and Canada. It stands for Committee on Uniform Securities Identification Procedures, which is responsible for maintaining a universal system for identifying securities.

In order to issue or trade a security, the issuer must obtain a CUSIP number. This is where the CUSIP distribution agreement comes into play. A CUSIP distribution agreement is a contract between the issuer of a security and CUSIP Global Services (CGS), a division of the American Bankers Association, that sets out the terms under which the issuer can obtain a CUSIP number for its securities.

The agreement typically covers the following key terms:

1. Scope of Services: This section outlines the types of securities for which the issuer may obtain a CUSIP number. It also specifies the countries in which the securities will be traded.

2. Fees: The fees charged by CGS for issuing CUSIP numbers are specified in the agreement. Typically, the fees are based on the number of securities to be issued and the complexity of the security.

3. Compliance: The agreement requires the issuer to comply with all applicable laws and regulations related to the issuance and trading of securities. This includes providing any necessary documentation and disclosures.

4. Indemnification: The issuer must agree to indemnify CGS and its affiliates against any claims arising from the use of the CUSIP number.

5. Termination: The agreement can be terminated by either party upon written notice. CGS may also terminate the agreement if the issuer breaches any of its obligations under the agreement.

In summary, a CUSIP distribution agreement is a vital document for issuers of securities. It allows them to obtain a CUSIP number, which in turn enables their securities to be traded on exchanges in the US and Canada. As an investor, the CUSIP number is an important piece of information that you can use to identify a security and track its performance.

In conclusion, understanding the CUSIP distribution agreement can help you navigate the world of securities trading more effectively. It is an essential agreement for issuers, and as an investor, you can use the CUSIP number to research securities and make informed investment decisions.