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Back to article: COVER (from the Fr. convert, from couvrir, to cover, Lat. cooperire)

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COVER (from the Fr. convert, from couvrir, to cover, Lat. cooperire), that which hides, shuts.in or conceals, a lid to abox or vessel, &c., the binding of a book or wrapper of a parcel; as a hunting term, the wood or undergrowth which shelters game. As a commercial term, the word means in its widest sense a security against loss, but is employed more particularly in connexion with stock exchange transactions to signify a " deposit made with a broker to secure him from being out of pocket in the event of the stocks falling against his client and the client not paying the difference " (In re Cronmire, 1898, 2 Q. B. 383). It is a mode of speculation engaged in almost entirely by persons who wish to limit their risk to a small amount, and, as a rule, the transactions are largely carried out in England with " outside " brokers, i.e. those dealers in securities who are not members of the Stock Exchange. The deposit is so much per cent or per share, usually 1% on the market value of the securities up to about twice the amount of the turn of the market; the client being able to close the transaction at any time during the currency of the cover, but the broker only when the cover is exhausted or has " run off." Cover is not money deposited to abide the event of a wager, but as security against a debt which may arise from a gaming contract, and it may be recovered back, if unappropriated.