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The move from physical certificates to electronic book keeping. Actual stock certificates are slowly being removed and retired from circulation in exchange for electronic recording.

The securities industry’s focus now is Dematerialization or going certificate-less. DTCC has established a Cross Stakeholder Committee with representation from the Issuers, Transfer Agents, Trade Organization, Exchanges and Regulators.

The industry approach to dematerialization has been broken down into a phased approach with the first phase being focused on mandating statement only for new issues.

The Exchanges are currently drafting rule filings to support the first phase of this initiative.

SSA is supportive of the elimination of physical stock certificates. Review SSA’s position paper on Dematerialization.

Why Issuers Should Care

Shareholder benefit:

  • Eliminate the risk of lost certificates when shares are held in DRS
    • Shareholders must pay a processing fee and bond premium equal to 2% of the market value of the lost shares.
    • Shareholders are recommended to insure packages containing certificates when sending them in for transfer
  • Faster transfer processing if certificates do not have to be printed
  • Reduced risk of failed trades due to compromised certificates
  • DTCC policy of charging brokers $500 to request a certificate, this cost is likely to be passed to the shareholder in the future

Issuer benefit:

  • Reduced costs related to printing, issuing and mailing stock certificates
  • Mitigate risk associated with certificates being used to conduct fraudulent transactions
  • Contribute to a successful industry move to T+2 or T+1 settlement