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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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