Holding Your Securities: Direct Registration
Holding a security can be done in three ways:
- Getting a physical certificate - You will receive a real, physical piece of paper that will state your ownership of the particular security. You will be also registered as the owner of the security on the issuer's books.
- Registration in Street Name - You will not receive a certificate, as opposed to holding the securities in your name. Instead, the securities will be registered in the name of a broker or other nominee on the issuer's books. The broker will keep a record that you own the securities.
- Direct Registration - The securities will be registered in your name on the issuer's books. However, the securities will be held by the company (or its transfer agent) in a book-entry form (in other words you will not receive a certificate).
In this article we will examine in greater details the direct registration option.
Advantages and Disadvantages of Direct Registration
A company may offer direct registration for its securities. In such a case it doesn't matter whether you have bought them directly from the company, its transfer agent or through you broker - you can choose to be registered as an owner directly on the company's books, without the need for a physical certificate to prove your ownership.
Despite the fact that you will not have a physical certificate, you will still receive an account statement periodically, as well as annual reports, dividends, proxies, and any other mailings directly from the issuer.
Some of the advantages of choosing direct registration include:
- You will not have to worry about losing your certificates.
- In contrast to the street name registration, with this option you will receive any communications, such as annual reports, proxies, etc., directly from the company.
- Selling your securities should be quickly, without the need of filling out time-consuming forms. Whenever you want to sell your securities through your broker, you only have to instruct him/her to move them electronically from the books of the company through the "Direct Registration System" (also known as DRS) and then sell them.
Of course, there are also disadvantages of choosing direct registration. For example, choosing to buy or sell registered securities through the direct investment plan will usually deprive you from the opportunity to buy or sell them at a specific price or at a certain time. The company may buy or sell shares for the plan at an average market price or at fixed times (on a weekly or monthly basis).
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