In 2012, it is pretty rate to see a stock certificate anymore. Stock certificates, like they sound, are legal documents that certify ownership of a specific number of shares of a given company. Stock certificates can be issued for both public and private companies, and up until about 10 years ago, it was pretty common to see stock certificates floating around in the financial world.
Now, however, companies are no longer required to issue paper stock certificates, and can instead use electronic registration. In fact, over 420 of the publically traded companies in the United States no longer offer paper shares. And if you want to get a paper share certificate? You may have to pay your broker a fee up to $500 to do it!
Why Did They Exist?
Stock certificates were created in the 1600s to prove ownership rights in a company.
There are two basic forms of certificates: registered stock certificates and bearer stock certificates. A registered stock certificate is only evidence that you own shares in a company. However, your ownership interest in the company is also recorded and maintained by the company in the stockholder’s registry. Companies are required to maintain records of stock holders for voting reasons, paying of dividends, and even tax and reporting implications (such as Facebook having over 500 shareholders and being required to file annual statements).
A bearer stock certificate, on the other hand, is a bearer instrument, which means that physical possession of the certificate is what entitles the holder to exercise their legal rights. Many bearer stock certificates are not recorded with names in the company registers, only the bearer certificate number, and as such, are perceived to be much more confidential instruments. However, these instruments are also subject to use in many financial crimes, and so they are extremely uncommon instruments to be found.
What to Do With Your Existing Ones?
If you currently have shares in a company in stock certificate form, chances are the you have the certificates in a safe deposit box (for which you pay a fee), and all reporting, such as proxies, annual reports, and dividends, are being handled through a transfer agent like Computer Share.
If you want to sell you shares, or do other complex investing like writing covered calls, you really should move your shares into a standard brokerage account. I recommend either Options House or Zecco. It is very easy to do: all you need to do is bring your paper shares to your broker and fill out a simple form. They will then deposit your shares into your account, and destroy your paper shares.
It can be sad to lose your paper shares, but will be cheaper and easier to deal with going forward.
Why Get Them Now?
Getting paper share certificates is still an option, but why would you want to get them considering you may have to pay a large fee?
Two main reasons:
-Gifts
-Mementos
Giving the gift of stock can be a great way to put someone, especially a child, on a great financial path. And doing it with a certificate can let them actually appreciate the gift. Many share certificates are decorated elaborately (see Disney), and kid’s would love looking at them.
Second, having a share certificate (even for just 1 share) can be a great memento of ownership in the company, especially if the company played a big part of your life. Many individuals get just one share, and have it framed to represent the company.
Readers, what are your thoughts on paper share certificates? Are they going to even be around in 10 years?
(This has been a guest post written by Robert, who blogs at The College Investor. He writes about personal finance, investing, and student loan debt issues for college students and young adults.)
I’m willing to bet that they will still be around in 10 years. If you think about it, passbooks for savings accounts didn’t start disappearing until the middle of last decade, and paper statements are still being used by the majority of companies. Granted there are companies out there that charge a fee to send out paper documents, plenty of people are still receiving them and will fight tooth and nail to continue to do so. Until there becomes some mandate to reduce the consumption of paper or there is some significant incentive to do away with printed materials, I can’t see anything changing. Besides that, there are still members of older generation who only know paper documents. As the younger generations, the ones brought up on tablets and cloud computing, start taking their place in society they will most likely be the ones to make the first real pushes to eliminate paper.
Jon,
Why are all your posts credited as “written by yours truly, Jon Elder”, but are actually guest posts where the only credit is an italicized line at the end of the article?
Hey Jon, it would have been cool to have been gifted a boat load of AAPL stock 15 years or even 10 years ago, woulnd’t it?
I believe I had a stock certificate gifted to me by the company I worked for back in the 90s. But it was only a kind of momento. I wouldn’t have been able to cash it in because the money was already in an account. And when I left the money was rolled into a traditional IRA.
I like the gift idea……otherwise not sure why I’d spend money on it. But as a gift it be pretty cool and almost seems worth more when it’s in your hands. I once bought some framed US dollars from the treasury as a teen. Looked pretty fancy!
Good article! I think giving them as a gift is a good idea. I don’t see why I’d purchase it otherwise. But as a gift and putting it in ones hands makes it seem worth alot more. I once bought framed dollars from the treasury and that was awesome!