In order to direct register shares, the shares must be transferred to the company's transfer agent. Chevron (CVX) and their transfer agent ComputerShare are an example. Frustratingly, ComputerShare will not create a new account unless they already have your shares. Their service is aimed at company (e.g. Chevron) employees who may want to start a Dividend Reinvestment Plan (DRIP) or direct purchase more shares. This was especially frustrating because in order to transfer shares out of my brokerage accounts the instruction forms require that an account name and number be provide for the 'transfer to'. The name must be the same owner/beneficiary as on the brokerage account. The transfer instruction forms are typically used to transfer securities from one broker to another.
Fortunately, one of my three online brokers knew that ComputerShare would create a new account if we submitted the paperwork without a ComputerShare personal account number. Instructing my broker to transfer my shares out into the ether without a specific destination was a little worrisome. But, as promised within 2 weeks ComputerShare sent my new account information and password. The correct amount of shares were in the account. On the next quarterly dividend date the correct amount was paid to my bank account as instructed.
ComputerShare could be much more helpful. Their phone help did not understand the concept of direct registration in relation to street-name. They couldn't tell me how to instruct my broker to transfer shares to CompuShare without an account. And, then they wouldn't create a new account. None of this information is available on their website.
One can understand why my brokers obscure the process for transferring assets out of their domain. Two of my three brokers even charge a fee. The broker that successfully transferred my CVX shares to ComputerShare for no cost is now doing most of my businesses including trading. Transferring shares to my now preferred broker from the other two was very straight forward via standard forms on the brokers websites.
Hopefully my experience will help you decide how to best protect your assets.
SIPC up to $500k
No SIPC. No FDIC. Investee’s discretion
High: ownership transferred by broker
Medium: must instruct broker to use Direct Registration System (DRS)
Administered by broker
Pledging securities as collateral
Creating a margin account
Receiving interest and dividend payments
Broker is added step in payment chain - delays possible
Administration regulated by
Book entry. No paper.
Investee's Register. No paper.
Easier for investee to go dark with fewer registered owners.
More difficult to avoid mandatory disclosures.