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)

  1. What do states do with unclaimed property?

    Unclaimed property refers to personal accounts in financial institutions or companies that have had no activity and whose ... Read Full Answer >>
  2. How do financial advisors execute trades?

    Today, almost every investor invests through online brokerage accounts. Investors often believe that their trades are directly ... Read Full Answer >>
  3. What are ComputerShare's escheatment services?

    Escheatment is the process by which ownership of abandoned property is transferred to the state. Escheated property can include ... Read Full Answer >>
  4. How does escheatment affect a company's shareholders?

    Escheated property in the United States is a designation for personal property such as bank accounts, shares, insurance proceeds, ... Read Full Answer >>
  5. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  6. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
Related Articles
  1. Forex Fundamentals

    How to Buy Chinese Yuan

    Discover the different options that are available to investors who want to obtain exposure to the Chinese yuan, including ETFs and ETNs.
  2. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
  3. Chart Advisor

    Is This The Beginning Of A Downtrend In Home Builders?

    Falling lumber prices and weakness on the charts of home builders suggest that the next leg of the trend could be downward.
  4. Economics

    What's a Horizontal Merger?

    A horizontal merger occurs when companies within the same industry merge.
  5. Investing

    A Breakdown Of Stock Buybacks

    Find out what these company programs achieve and what it means for stockholders.
  6. Investing Basics

    How MasterCard Pulled Off a Buyback

    Stock buyback refers to publicly traded companies buying back their shares from shareholders. Why would they do that?
  7. Mutual Funds & ETFs

    The Most Liquid ETFs/ETNs: Should You Invest?

    If you want liquidity, here's a list of popular ETFs and ETNs. But investors should be aware of outside factors that could impact their performance.
  8. Economics

    3 Notorious American White Collar Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  9. Economics

    What Is Servant Leadership?

    Servant leadership emphasizes innovation, employee empowerment, and the development of leaders who serve an organization’s stakeholders first.
  10. Economics

    Understanding Corporate Culture

    Corporate culture encompasses the beliefs and behaviors that determine how a company and its employees interact and how they work with customers.
  1. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  2. Corporate Culture

    The beliefs and behaviors that determine how a company's employees ...
  3. Sticky Wage Theory

    An economic hypothesis theorizing that pay of employees tends ...
  4. Earnings Before Interest & Tax - EBIT

    An indicator of a company's profitability, calculated as revenue ...
  5. Record Date

    The cut-off date established by a company in order to determine ...
  6. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center