Callable Security
Categories: Derivatives, Accounting, Trading, Stocks, Bonds, Managed Funds
No, it's not a rent-a-cop that you can ring up if you get scared of lightning one night. It's a type of investment vehicle.
A callable security is one in which the issuer (or a third party) has the right to repurchase after a certain period of time and at a specific price. (See: Callable Common Stock). It could involve an individual investor or a subsidiary of a larger company issuing the callable stock to its parent company.
Let's say Mary Callingbird owns 250 shares of Call Me Crazy Inc. They are callable at 108% of the current market price, which at the moment is $300 a share. So, Call Me Crazy could force Mary to sell her shares back if the price hits $324. As the shares get closer to this mark, the chance gets higher that the stock will get called in. This callable security isn't likely to rise much past the $300 price, since its clear to everyone that Call Me Crazy will probably call the shares in.
Because of this, there's additional regulation about these securities. The Financial Industry Regulatory Authority (FINRA) has rules stating that these investment vehicles must have explicit disclosures if a security is callable.