Ask TheStreet
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Do companies still issue stock certificates? I rarely hear about them anymore. Thanks, J.B. Don't worry, it's not your hearing that's the problem. It's just that stock certificates are quickly becoming a thing of the past, and soon will only be found hanging in people's offices. As a result of legislation designed to foster corporate cost-cutting, only a handful of the 50 U.S. states still require public companies to issue physical certificates. Stock brokerage firms and many of the issuing companies enthusiastically support this effort, which is known as "dematerialization." The move toward dematerialization seems to be just fine with most investors, who would rather use book-entry stock ownership, where the issuers record all details of ownership electronically. It is more convenient than locking stock certificates away in safe-deposit boxes. According to the Securities Industry Association, book-entry ownership can be accomplished by having the securities held in the investor's account at the broker-dealer, a method known as putting it in "street name." Another alternative is the use of the Direct Registration System, where investors can have their positions electronically recorded by the issuer or at their transfer agent. AT&T T became the first company in the United States to do away with paper certificates. Investors now receive a computer-generated report showing them how many shares they have outstanding. For the few investors who still prefer holding their shares in physical form, it can be a very expensive proposition, says Bob Kerstein, founder of Scripophily.com. Scripophily is the hobby of collecting stock and bond certificates.
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