Today, investing in stocks via computer or smartphone has become mainstream. But in the past, when stock investments were not entirely digitized, companies needed to issue paper-based stock certificates to provide their shareholders evidence of their stock ownerships.
Stock Certificates Explained
Stock certificates are proof of ownership of shares provided by the issuing company to its shareholders. Before the internet and electronic trading platforms, investors had to buy and sell shares in person or through their brokers.
Trading commissions back in the day were pretty expensive, and once the stock purchase is complete, the investor receives a stock certificate that contains important details, including:
· Shareholder’s name
· Number of shares owned
· Type of Stock
· Date of purchase
· The Committee on Uniform Securities Identification Procedures (CUSIP) number
· Signature of the individual authorized to issue the certificate
· Corporate seal
Prior to digitizing transaction records, investors only had stock certificates as evidence of owning shares of stock. If they were looking to sell the shares, they first needed to show these paper-based documents to a broker. The broker would then return the certificates to the issuing company for sale.
Stock Certificates in the Present Day
Today, stock certificates are not as common as they were many years ago. They now even have significant costs to delay or cancel a request. In addition, as the investing and trading space transforms digitally, many companies are slowly putting an end to issuing stock certificates.
It is still possible to own a stock certificate in some cases, although you need to do two things. First, find a company that still provides stock certificates. Second, find out whether the advantages and disadvantages of having a stock certificate would work for your needs.
As for the issuing company, they are two ways they obtain this type of paper document: With the broker you bought the shares from or directly through the transfer agent.
Brokers: Brokers keep records of all the purchases necessary to secure a stock certificate on their clients’ behalf. You can contact the broker via the customer service department and inquire about the process you need to go through to exchange your electronic shares for paper-based stock certificates.
Transfer Agents: Transfer agents allow you to obtain stock certificates directly. You can find a transfer agent’s contact information on the investor relations section of the company’s website or by contacting the investor relations department.
Once you have the transfer agent’s contact details, you can get in touch with them to learn the process and costs of converting your electronic shares to paper stock certificates.
Found an Old Stock Certificate, What to Do?
Old stock certificates may either still be valuable or have value as collectibles. First, check whether the company on the certificate is still operating. If it is, you can reach out to the investor relations department to ask about the stock certificate’s validity and value.
Keep in mind that there is a high possibility that paper stock certificates have been converted to digital shares.
If you’re having a tough time finding the company, you can ask your online broker for help. Your broker can try looking for the company with CUSIP, as it is related to the share’s genetic code and has all the information on a trade.
Perhaps online brokers provide such a service because they expect their clients to transfer the assets in their brokerage accounts.
If the stock certificate has no value anymore, the issuing company might consider buying it as a collectible, a practice known as scripophily.