A:

Currently, most stock ownership is done electronically thru the combined effort of the brokerage firms and the transfer agents representing the company that issues stock. When paper certificates are issued, the securities are registered in the investor's name by the transfer agent/corporation and physically held by an investor. Nowadays, in order to sell the stock position, the investor has to first deposit them into a brokerage account where they loose their physical status and become only electronic data. This electronic record of ownership administered by a brokerage house is called registration in the "Street Name". Trading of securities in the street name involves no physical delivery of securities. All brokers have to do on the client's behalf is to exchange electronic information between themselves and transfer agents. (See our FAQ on why securities are held in stree name to learn more)

The "Transfer Agents" record the name of each registered shareholder, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly cancelled and new certificates are issued in the name of the new owner/street name. Before on-line brokers and personally directed accounts, holding a physical stock certificate was a necessity, now you need to specially request one directly from the company or thru your brokerage firm. However, this is seldom done due to the commissions/transaction costs, payment due to a corporation to actually print the certificate, and the extra hassle of the investor having to store the documents in a safe place. Plus, brokers cannot actually sell the securities until you surrender the certificate and they are registered in street name, which will cause delays if you are eager to sell quickly.

Since both the brokerage firm and the transfer agent retain electronic data pertaining to your stock shares held electronically, it is unlikely that both would be affected by data loss at the same moment. This gives you a solid backup between the two different entities while you should also be aware that most financial firms have adopted the daily disk backup system as part of the SEC's "Disaster Recovery and Business Continuity Plan" requirement established after the terrorist act of September 2001. You can also protect yourself by keeping trade confirmations and hard copy statements that prove your ownership. (Do you hold physical stock certificates that you inherited or found? Read Old Stock Certificates: Lost Treasure Or Wallpaper? to find out how to find out how much its worth)

RELATED FAQS
  1. What does "in street name" mean, and why are securities held this way?

    In almost every instance when you buy or sell securities with a broker, your name is not actually on the stock or bond certificate. ... Read Answer >>
  2. I hold stock certificates in a company that just had a stock split. What happens ...

    The short answer is that a stock split will have little effect on the holder of stock certificates. In most cases when an ... Read Answer >>
  3. I lost my share certificate. Do I still own the stock?

    Regardless of whether a shareholder loses his or her stock certificate, that person still owns the shares. However, in order ... Read Answer >>
  4. Should I convert my telecom paper stocks to electronic records?

    Convert your paper shares of a telecommunications company's stock to electronic form in just a few simple steps, and make ... Read Answer >>
Related Articles
  1. Investing

    Old Stock Certificates: Lost Treasure Or Wallpaper?

    What if you've discovered some old shares in bearer form? Follow our tips and find out what they're worth.
  2. Investing

    What Does a Transfer Agent Do?

    Transfer agents maintain the records and documents related to shareholder accounts.
  3. Insights

    What Is a Silver Certificate Dollar Bill Worth Today?

    Although a silver-certificate dollar bill no longer can be exchanged for silver, the date, grade and unique features make certain certificates very valuable.
  4. Trading

    Basics Of The Mechanics Behind Electronic Trading

    What was once associated with shouting traders and wild hand gestures has now become more closely associated with statisticians and computer programmers.
  5. Personal Finance

    8 Low-Cost Ways To Transfer Money

    If cost is your primary concern, there are several cheap(er) ways to move funds.
  6. Personal Finance

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  7. Investing

    5 Money Transfer Tips For Foreign Workers

    If you are working in the U.S. as a foreign worker, here are some tips for sending money back home.
  8. Investing

    How to Choose the Right Real Estate Broker

    Buying or selling a home can be the largest financial transactions of your life. Here's how to choose the right real estate broker or agent.
  9. Financial Advisor

    How to Find the Best Life Insurance Agent

    Choosing a life insurance agent is the first and most important step in obtaining coverage. Buyers should pay attention to five key factors.
RELATED TERMS
  1. Cage

    A term used to describe the department of a brokerage firm that ...
  2. Stock Record

    An electronic system that helps brokerage firms keep track of ...
  3. Transfer Procedures

    The procedure by which ownership of a stock moves from one party ...
  4. Dematerialization - DEMAT

    The move from physical certificates to electronic book keeping. ...
  5. Street Name

    When securities are held in the name of a broker or other nominee, ...
  6. Registered Holder

    Shareholders who hold their shares directly with a company.
Hot Definitions
  1. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  2. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  3. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  4. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
  5. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  6. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
Trading Center