Stock Certificates and How They Work Today

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,

·      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


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.

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