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 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. 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 >>
  4. How do you get a hard copy of a stock certificate?

    Before online brokers and personally-directed accounts, holding a physical stock certificate was a necessity, as this was ... Read Answer >>
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  1. In Street Name

    A brokerage account where the customer's securities and assets ...
  2. Dematerialization - DEMAT

    The move from physical certificates to electronic book keeping. ...
  3. Transfer Procedures

    The procedure by which ownership of a stock moves from one party ...
  4. Stock Power

    A legal power of attorney form that transfers the ownership of ...
  5. Registered Holder

    Shareholders who hold their shares directly with a company.
  6. Certificated Stock

    The stock of a commodity that has been inspected by qualified ...
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