Street Name - Taking Possession of Stock Certificates
Description
This article is from the Investing Articles:
Stocks and Options series.
Street Name - Taking Possession of Stock Certificates
An individual has three choices of possession when purchasing
stock. The company (issuer) can mail the stock certificates to the
individual where they can be kept at home or in a safe deposit box;
the individual can have the brokerage firm who bought the stock take
possession of the actual stock certificates; the brokerage firm can
hold the stock in "street name".
In the overwhelming majority of instances, most individuals let the
broker hold the stock in "street name". When a brokerage
firm holds customer's stock in "street name" the firm keeps
track of the ownership of the stock electronically. The firm doesn't
have actual possession of the stock certificate. By the way,
U.S. Treasury securities are only sold this way.
Advantages of Having the Broker Hold
Stock in "Street Name"
- The stock is always available for
immediate sale and doesn't have to be mailed in when the individual
desires to sell.
- The proof of ownership is in the form
of the statements and confirmations received from the brokerage
firm. These statements are mailed to the individual every
month.
- If the stock splits, the individual
doesn't have to go through the trouble of returning the old
certificates and having new ones issued.
- Many individuals have a tendency to
lose or misplace stock certificates.
- Communications from the company such
as proxy notices, annual reports, meetings, etc. are passed on to
you by the brokerage firm.
Disadvantages of Having the Broker
Hold Stock in "Street Name"
- The individual can't sell the stock
directly to another person without asking the brokerage firm to have
a certificate(s) issued. Although, how many times do most people
sell stock directly to another individual?
- As some people move around in life,
they may tend to forget about a brokerage account and it becomes
inactive. It takes a little time to re-establish and exchange proof
of identity after several years (decades).
 
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