A stock certificate represents an ownership stake in a company. Prior to the age of electronic stock exchanges and paperless financial processes, stock certificates were traded in paper form. Part of the reason a stock trade takes three business days to “settle” once the trade has been completed harkens back to when it took more time to physically deliver a certificate or other proof of ownership to the purchaser.
With fewer and fewer investors trading outside of the electronic methods available, stock certificates are becoming less frequent, and almost collectors' items in their novelty. It is important, however, if you do come across a stock certificate to research the certificate to obtain a complete history of both the ownership of the underlying shares and the history of the company itself since the issuance of the security.
Research the company that issued the security. If you know the date the certificate was issued, you can research whether or not the company has gone through reorganization ("reorg") or a stock split since the issuance of the stock. Most online financial websites, such as Yahoo! Finance, offer historical pricing with notations for reorgs or splits.
Research the investor information for the company that issued the stock if you do not already have the contact information from the face or back of the certificate. This contact information is generally available on the company’s website, or by calling the company’s investor relations department. This information is also available through a Bloomberg terminal.
Obtain the contact information for the company’s transfer agent. The transfer agent is the company charged with handling the transfer of the company’s stock. Sometimes this is done internally, sometimes this is handled by a third party. If the company’s website does not have the transfer agent’s information, you can also do a search of the transfer agent database maintained by the Securities Transfer Association.
Contact the transfer agent for the company. The more information you have available about the stock certificate the better, including the certificate number, number of shares, and name of the registered owner. However, if you are not the registered owner of the certificate the transfer agent may be unlikely to provide you much information.
If an investor holds the stock at a broker, the transfer agent will hold the shares in “street name,” or as a “book entry” (the shares are in the name of the broker, for the benefit of the specific customer). If there is no broker involved, the transfer agent will issue shares to the investor in the investor’s name.
If you are attempting to replace a lost or stolen certificate, most companies will require the following before you can complete your request: 1) an affidavit stating the facts regarding the loss or theft of the certificate, 2) the purchase of an indemnity bond to protect both the transfer agent and the corporation against liability in case the certificate is later presented by a bona fide (innocent) purchaser, and 3) the new certificate request must be made before an innocent purchaser acquires the certificate.
The transfer of securities is governed by state, not federal, law. As such, the Securities and Exchange Commission (SEC) does not usually have jurisdiction over stock transfer issues.