Replacing Lost Or Stolen Securities Certificates
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What Are Securities Certificates?
Securities certificates are the written evidence of the ownership of shares of stock in, or an obligation to the bondholder by, a particular company. These certificates are valuable because they are negotiable instruments, like checks drawn on a bank. Securities certificates are issued by the company, acting as its own transfer agent, or by an outside "transfer agent."
What If My Securities Certificates Are Lost or Stolen?
If you discover that your securities certificate is lost, accidentally destroyed, or stolen, you should immediately contact the transfer agent, or a broker-dealer, and request that a "stop transfer" be placed against the missing securities. The "stop transfer" is an important step in protecting your ownership interest in the security attached to the certificate, and its activation will prevent a person who improperly has possession of the certificate from having the ownership of the security transferred to him. In addition, the transfer agent or broker-dealer will notify the Securities Exchange Comission's (SEC) lost and stolen program of the missing, lost, or stolen securities. This report reduces the likelihood that people can traffic in stolen securities because broker-dealers and banks can inquire whether securities presented for sale or as collateral for a loan are reported as missing, lost, or stolen.
If you are expecting receipt of a certificate through the mail, and it does not arrive when you expect it to, you should immediately contact the organization that arranged the transaction. While many transfer agents, banks, broker-dealers, and corporations choose to use registered or certified mail to deliver stock certificates to individuals, there is no specific legal requirement that they do so. A certificate lost in the mail can usually be replaced without cost to the owner if the loss is reported promptly.
How Can I Get New Certificates?
When a securities certificate belonging to a security holder is lost, accidentally destroyed, or stolen, the security holder can obtain a new certificate to replace the missing one. However, before issuing a new certificate, corporations usually require the owner of the lost certificate to satisfy several requirements:
- The owner must set forth, in an affidavit, all the facts surrounding the loss
- The owner must post an indemnity bond, which is an "open penalty" bond that the owner of the lost certificate usually pays a premium for, to protect the corporation and the transfer agent against the possibility that the lost certificate may be presented later by an innocent purchaser for value
- The owner must request a new certificate before the company receives notice that the missing certificate has been acquired by another bona fide purchaser
What If I Find My Certificates After Reporting Them Lost?
In the event the missing certificate is later found or located, the investor should notify all parties concerned so that the "stop transfer" and the lost or stolen securities report may be removed. Otherwise, the investor will have difficulty selling the securities later.
You should keep a record of your certificate numbers in a place separate from the certificates themselves. If a certificate is lost or stolen and subsequently transferred on the books of the transfer agent, it may be impossible for you even to establish possession at an earlier date because the transfer agent will no longer have a record of your name. If, however, you have a record of the certificate numbers, the transfer agent should be able to ascertain when it was transferred and to whom.
Do I Need an Attorney For Replacing My Certificates?
Replacing lost or stolen certificates can be an extremely costly and troublesome event at certain times. Consult a business attorney immediately if you suspect foul play with your missing securities certificates. An attorney may also be useful in developing a trust or other effective place to hold your certificates.
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Last Modified: 09-30-2014 02:49 PM PDT
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