Securities certificates are the written evidence of the ownership of shares of stock in, or an obligation to the bondholder by, a particular company. Certificates are valuable because they are negotiable instruments like checks drown on a bank. Certificates are issued by the company, acting as its own transfer agent, or by an outside "transfer agent."
If you discover that your securities certificate is lost, accidently 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 a security and will prevent a person who improperly has possession of the certificate from having the ownership transferred to his or her name. In addition, the transfer agent or broker-dealer will notify the SEC's 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 doesn't arrive, you should immediately contact the organization that arranged the transaction -- typically your broker-dealer. 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 Federal requirement that they do so, and some prefer regular mail so as not to call attention to the potential value of the item. A certificate lost in the mail can usually be replaced without cost to the owner if the loss is reported promptly.
When a securities certificate belonging to a securityholder is lost, accidently destroyed, or stolen, the securityholder 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:
(1) The owner must set forth, in an affidavit, all the facts surrounding the loss;
(2) The owner must post an indemnity bond 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 indemnity bond usually is an "open penalty" bond in which the owner of the lost certificate usually pays a premium for the bond, determined by the facts surrounding the lost and whether the securities were in registered or bearer form, and the bond does not protect the owner against losses incurred by the issuer or its transfer agent as a result of the original lost certificate); and
(3) The owner must request a new certificate before the company receives notice that the missing certificate has been acquired by another BONA FIDE purchaser.
As you can see, although a securityholder may obtain a replacement for a lost, destroyed, or stolen certificate, doing so can be a burdensome, and perhaps, a costly procedure. Therefore, if you own securities and have possession of a certificate, you should take appropriate steps to safeguard it, such as storing it in a safety deposit box.
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.
You should keep, at a minimum, a record of certificate numbers in a place separate from the certificates themselves (see information for investors on "Keeping Good Records In Case of Lost or Stolen Securities). 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.
Often, broker-dealers, banks, transfer agents and corporations have standard procedures to assist investors in replacing lost certificates. They also will assist you in obtaining an indemnity bond.
If you have any questions concerning lost or stolen certificates, you may contact the Office of Consumer Affairs, Securities and Exchange Commission, Washington, D. C. 20549. However, investors should be aware that the actual transfer of securities is governed by state law, rather than the federal securities laws. The SEC seldom has any jurisdiction over the transaction. The Securities Transfer Association, a private group, has adopted rules which serve as guidelines for most transfer agents, and may be able to supply further information if your questions are not fully covered above. The address of the association is: Administration, Securities Transfer Association, P. O. Box 5067, 12 Carriage Road North, Hazlet, NJ 07730-5067.
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