Paper Certificates or Street Ownership? Is one safer?
When you buy stock in a publicly traded company, you become a shareholder and are entitled to own a stock certificate of ownership, if the company issues those. In the past, some of these certificates have become collectible works of art or memorabilia, as companies put extra effort into producing attractive looking documents. Stock certificates usually look sort of like a university diploma, with lots of fancy writing and the logo of the company proudly displayed. But what is more important than what they look like is what they represent in terms of ownership rights and rewards.
If you own stock in a company, the company will usually make a record of your ownership and in that way, if you were to lose your actual certificates, you could still make a claim to ownership and have it verified by a search of the company’s stockholder records. But even so, it is a good policy to store stock certificates in a safe place like a bank deposit box, to prevent anything from happening to them in the event of a theft, fire, or other calamity.
But most people who now own stock never see their certificates, because the ownership is kept in what is commonly referred to as “the street name”. Street name ownership means that you buy your stock through a licensed stockbroker, and instead of sending you certificates, the company simply transfers ownership by means of accounting procedures. Your broker will buy the stock for you from traders on the floor of the major exchanges like the NYSE or the NASDAQ, and then make a record of that transaction in your individual account. When you sell the stock, the account reflects that you no longer own it. So for all practical purposes, your stockbroker keeps your stocks, but reserves them under your name. They are called “street name” because they are kept in the name of the Wall Street firm where your broker is employed.
The reason that almost all stocks are now kept in the street name, instead of being issued as actual printed certificates is convenience. If you order certificates, it can take several weeks for them to get delivered to you through the mail. And if you want to sell them during that time in transit, you won’t be able to. Similarly, if you sell the stock you have to deliver the certificate in a timely fashion to your broker. Because many stock transactions depend upon speed in order to take advantage of fast paced market and price swings, most of us prefer the liquidity and agility of having our stock ownership simply recorded electronically in the computer of a broker’s accounting department.