Stock Certificate FAQ

As the Industrial Age swept over America, investors began to discover a new way to form companies and make investments: the corporation. The corporation allowed a multitude of investors to share ownership in a company, rather than the previous partnerships which severely limited ownership and investment options. The greatest symbol of this shift and the resulting rise of Wall Street in the early 1900s was a mere piece of paper: the stock certificate.

Definition

According to Investopedia, "stock" simply indicates a share of ownership in a company. Owning stock means that you have a legal claim upon the company's earnings and assets. The more stock you own, the larger your ownership in the company is. Stock is also referred to as "equity" or "shares."

Identification

A stock certificate is a document that provides proof of ownership of a given stock. The certificate is issued by the company in which the shares are held, and may represent any number of shares, from a single share to millions of shares. Physical stock certificates are generally no longer routinely issued. Instead, stock ownership is recorded and maintained electronically by the brokerage handling the stock transaction.

Features

Every stock certificate includes the name of the corporation issuing the stock, the date that the corporation was incorporated, the date the shares were issued, the stock owner's name and the number of shares owned. Each certificate also displays an INIS certificate number, a seal of authenticity and an authenticating signature.

Function

The certificate's registration number, or ISIN code, consists of 12 alphanumeric totals. The first two characters indicate the home country of the company issuing the stock. The next nine characters form the unique identifying number for the certificate, and the final digit is used to check the number's authenticity. The numbers assigned are generated by a complex formula to protect against stock forgery and counterfeiting.

Significance

Before the advent of electronic stock trading, stock certificates were necessary to provide proof of stock ownership. Owners wishing to sell their shares of stock would deliver their stock certificates to a broker who would sell the shares on their behalf. Since the invention of electronic trading however, stock certificates have become obsolete and are not required to prove stock ownership or to facilitate stock sales and purchases.

Considerations

All U.S. corporations are required by law to provide a stock certificate upon request. Stockholders can receive stock certificates directly from the issuing corporations, or by requesting that their stock broker obtain their stock certificates on their behalf.

Value

Old stock certificates may in fact still be valid proof of ownership, provided that the issuing company still exists and the stocks have not been disposed of prior to the stock certificates' discovery. Even stock certificates which are not valid representations of stock ownership may still have some value as collectibles.

References

• Investopedia: Stocks Basics: What Are Stocks?
• Investopedia: How Do You Get a Hard Copy of a Stock Certificate?
• Investopedia: How Does The ISIN Numbering System Work?