Direct Registration FAQ

Posted at 3:34 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Below is a list of frequently asked questions relating to direct registration. It is edited to focus on the items of your interest.

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What is the Direct Registration System?

DRS provides for electronic direct registration of securities in an investor’s name on the books of the transfer agent or issuer, and allows shares to be transferred between a transfer agent and broker electronically.

After I make my decision on how I want to hold my security, what do I do?

Direct registration is a relatively new method to hold corporate equity, and not all issuers currently offer this option. You should check with the issuer or your broker to find out if the issuer offers direct registration.  If you are purchasing a security, tell your broker you want to hold your securities in direct registration.  If you currently hold a certificate, you can mail or take your certificate either to the issuer or to your broker with instructions to change to direct registration. If you currently hold your security in street name registration, you can instruct your broker or the issuer to move your security position to the issuer for direct registration. In any situation, you will receive a statement of ownership from the issuer acknowledging your DRS book-entry position once the change has been made . If you want a certificate or if you want to use street name registration, tell your broker your choice at the time of purchase. If you elect a certificate, one will be sent to you. If you chose street name registration, your broker will send you a confirmation and periodic account statements acknowledging your ownership. If you currently hold a certificate, you can deliver the certificate to your broker with instructions to change your registration to street name registration. If you currently hold in street name registration, you can tell your broker to obtain a certificate for you.

How do I sell my security held in Direct Registration?

You can instruct the issuer to sell your security (many issuers can accommodate sale requests); or you can instruct your broker or the issuer to electronically move your security to your broker for your broker to sell; or you can request a physical certificate and deliver it  to your broker to sell.

How do I sell my security held in my possession?

You can deliver the certificate to your broker with your instructions to sell or you can deliver the certificate to the issuer with instructions to change how you hold your security from certificate to direct registration and to sell (many issuers can accommodate sale requests). When selling a security through the issuer, the issuer will sell your security under the terms and conditions in place for that issue. For example, some sell orders will be executed on the day the  issuer receives them, and some orders are aggregated for frequent, but not daily, execution. (Note: you should ask the issuer if it offers a  selling service and what the terms and conditions are.) Proceeds from the sale will be mailed to you three business days after the date of sale. When selling through your broker, your instructions will be acted on immediately and in accordance with the guidelines it provides to you. Proceeds from the sale will be made available to you or credited to your account three business days after the date of sale.

What about my relationship with my broker if I use direct registration?

You can maintain your relationship with your broker regardless of your choice of registration. When you purchase a security to hold in direct registration, you can tell either your broker or the issuer to include pertinent broker information in the issuers records. If you do not have your broker information included in the issuers records at the time of purchase and later want to or if you want to change the broker information in the issuers records, you may do so. You should contact either your broker or the issuer to obtain information on the procedures and the documents required for such actions. You should note that to change or add a broker at the time you choose to sell your shares through your broker could create a delay in getting the securities to your broker in time for settlement.

Will I get a certificate for additional stock distributions if I physically hold my shares?

If the issue is eligible for direct registration, you will probably receive a statement of ownership instead of an additional certificate.  You always have the right to request and receive a certificate or to electronically move your securities to your broker.

What are the fees associated with direct registration?

There are no fees charged by an issuer for direct registration. However, because brokers offer differing services and plans, you should contact your broker to learn what, if any, fees it charges.

If I opt for direct registration, what happens if I lose my statement of ownership?

If you ever need a duplicate statement of ownership, you should contact the issuer which will mail you a new statement of ownership.

What happens if my certificate is lost or stolen?

You should immediately notify the issuer of the loss or theft and request a replacement certificate. If you have an account with a broker, you can ask your broker to notify the issuer on your behalf. Other financial institutions where you have accounts, such as banks, may also notify the issuer for you at your request.  The issuer may ask you to complete an affidavit explaining the circumstances of the loss or theft. You will have to pay the cost of an indemnity bond to protect the issuer against future claims on the certificate. (Indemnity bonds usually cost approximately 2% of the value of the securities.) If you find your original certificate after you have received a replacement certificate, you should immediately return it to the issuer or your broker.