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. Can I give stock as a gift?

    Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. ... Read Answer >>
  3. Is this stock certificate worthless?

    I bought 50,000 shares of restricted common stock from a company in December 2015 and received a stock certificate. I then ... Read Answer >>
  4. Can I pass on the stock certificates to my son in my will?

    I was told I could get stock certificates from the company that I retired from. Will my son get the st... Read Answer >>
  5. What is the electronics sector?

    Learn more about the electronics sector and the challenges and opportunities presented to electronics companies by new and ... Read Answer >>
  6. Can you short sell stocks that are trading below $5? My broker says that I can't.

    Short selling can be very risky for both the investor and the broker. Brokers will often tell investors that only stocks ... Read Answer >>
Related Articles
  1. Investing Basics

    What Does a Transfer Agent Do?

    Transfer agents maintain the records and documents related to shareholder accounts.
  2. Options & Futures

    The 4 Ways To Buy And Sell Securities

    Know the four main avenues of buying and selling investment instruments.
  3. Investing Basics

    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.
  4. Personal Finance

    8 Low-Cost Ways To Transfer Money

    If cost is your primary concern, there are several cheap(er) ways to move funds.
  5. Credit & Loans

    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.
  6. Investing Basics

    Stocks Basics: What Are Stocks?

    The Definition of a Stock Plain and simple, stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership ...
  7. Personal Finance

    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 Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  9. Home & Auto

    Finding A Good Real Estate Agent

    Don't go it alone in the real estate market. We'll show you how to find the help you need.
  10. Retirement

    Electronic Trading: Introduction

    When it comes to electronic trading, for most individual investors, taking a long-term buy-and-hold approach is probably the best strategy. Most of us simply don't have the time or the expertise ...
RELATED TERMS
  1. In Street Name

    A brokerage account where the customer's securities and assets ...
  2. Stock Power

    A legal power of attorney form that transfers the ownership of ...
  3. Cage

    A term used to describe the department of a brokerage firm that ...
  4. Transfer Agent

    A trust company, bank or similar financial institution assigned ...
  5. Share Certificate

    A share certificate is a written document signed on behalf of ...
  6. Push Out

    One of two ways to effect a stock split. In a push out, new share ...
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center