I once read the three most important pieces of paper to have in life is the birth certificate, the stock certificate and the
death certificate. On May 22, 2012 many Facebook stock investors learned that the company would not be issuing paper stock certificates, and that only digital certificates will be available. Due to the decrease demand of paper certificates, digital stock ownership has become widely popular, and many public companies for example Microsoft, Apple, Tiffany or Intel does not issue paper certificates. Companies that have decided to go digital have said that it is cheaper and convenient for the public company and the shareholders.
Stock certificates the new derivative
Since paper stock certificates are becoming replaced by digital stock certificates, paper stock certificates have become a stock trading currency. Stock certificate trading is not new to stock certificate collectors; investors who collect stock certificates are called Scripophilists or Scripophiliacs. Scripophily, the collecting of stock certificates gained recognition as a hobby around 1970. Many rare stock paper certificates like the 1988 Apple Computer Inc. stock certificate can be sold for $895 which is more than one share of stock purchased today according to the stock certificate collector website scripophily.com Becoming a stock certificate traders does not require any regulatory oversight by the SEC, anyone can trade stock certificates without breaking any SEC laws, no stock broker license is needed. But there are rules that stock certificate traders must follow, according to the SEC:
- The seller must state and make it clear that he/she is not a broker/dealer and the certificate is not being sold for investment purposes.
- The stock certificate is stamped "non-redeemable" and "non-transferable".
- The certificate is sold for at least twice the value of the current share price.
To learn more about the rules on stock certificate trading go to sec.gov
Uncovering Old Stock Certificates
Deciding whether to collect stock certificates as a hobby or hold on to them as an investment, is a decision made by the owner of the stock certificate. If you find or discover a rare stock certificate it is important to do some research on the security. Whatever you decide here are some tips to consider:
- Do research – it is important to find out if the company that issue the stock certificate still exist. If the company does not exist or was not purchase by another company, the security will not have value unless you decide to keep the stock certificate as a collectible. If you want to find out information on the value of a security, the SEC has information on finding out the history of obsolete stock certificates.
- Understand the CUSIP – the CUSIP number is important information found on the actual stock certificate. The CUSIP identification number will allow the secretary of state’s office, which will be the state of incorporation that issued the stock certificate to tell you if the company went out of business, changed its name or moved out of state.
- Transfer agent – if you find out that the stock certificate has value and you do not want to keep it as a collectible. The transfer agent is the company that handles the administration of stock certificates. The transfer agent will give you information regarding how to cash in an old stock, keep in mind if you inherited the stock a will or some of other estate document may by necessary. He or she will also provide you information if you want to hold the security in a brokerage account.