Transfer of Common Stock

Question 1

Securities may be held in one of three ways:

Answer 1

1) Physical Certificate
2) Street name registration
3) Direct registration

Question 2

Physical Certificate

Answer 2

The stock is registered in the owner’s name on the issuer’s books, and a physical stock certificate is delivered to the owner or his broker.

Question 3

Street name registration

Answer 3

The security is registered on the issuer’s books in the name of the owner’s brokerage firm (the street in “street name” refers to Wall Street), and the brokerage holds the security in book-entry form. The term “book-entry form” meaning there is no physical certificate and ownership is recorded electronically. The beneficial rights of ownership, such as the right to vote and the right to sell, belong to the customer, not the brokerage firm.

Question 4

Direct Registration

Answer 4

The security is registered on the issuer’s books in the owner’s name, and either the company or its transfer agent holds the security in book-entry form on the owner’s behalf.

Question 5

Today most common stock shares are held in

Answer 5

Street name

Question 6

For those who still hold physical certificates, the transfer of ownership is done by endorsing and assigning the certificate to the new owner. The seller must fill out a ______ form located on the back of the certificate.

Answer 6

Stock Power

** This identifies the name of the new owner, the number of shares being transferred, and the broker who will have power of attorney for the purchaser in the transfer process. Assignment to a power of attorney makes the certificate negotiable only by the brokerage firm, which allows it to be safely mailed. The certificate must be signed by the seller exactly as her name appears on the certificate.

Question 7

Stocks that have been bought by a customer but left in the broker’s name are said to be held in

Answer 7

Street name

*The customer is said to be the beneficial owner, and the broker is the record owner.

Question 8

The _________ allows investors to be registered directly on a company’s books, whether stocks are bought through a broker or directly from the company.

Answer 8

Direct Registration Sysytem (DRS)

Question 9

Companies typically keep track of their securities issues by hiring a

Answer 9

Transfer Agent

• Usually a bank or Trust company
• The transfer agent records who owns shares and in what form, recording changes of ownership as they occur.

Question 10

Companies also hire a _____ to monitor and audit the transfer agent.

Answer 10

registrar

*The registrar makes sure that the transfer agent cancels old stock certificates whenever it issues new ones so that the company will always have the proper number of outstanding shares. A registrar makes sure that the company does not issue more shares than were authorized and ensures that the company’s files are kept current as to the owners of an issue. Registrars are usually banks.