Cover

Cover (from the Fr. couvert, from couvrir, to cover, Lat. cooperire), that which hides, shuts in or conceals, a lid to a box 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.