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.
Ownership Model
|
Street Name
(Brokerage)
|
Direct Registration
(Transfer Agent)
|
Insurance
|
SIPC up to $500k
|
No SIPC. No FDIC. Investee’s discretion
|
Fungibility
|
High: ownership transferred by broker
|
Medium: must instruct broker to use Direct Registration System (DRS)
|
Investee-Investor communication
|
Administered by broker
|
Direct
|
Pledging securities as collateral
|
Medium
|
High
|
Creating a margin account
|
Easy
|
Not available
|
Receiving interest and dividend payments
|
Broker is added step in payment chain - delays possible
|
No delays
|
Administration regulated by
|
SEC
|
SEC
|
Record keeping
|
Book entry. No paper.
|
Investee's Register. No paper.
|
Corporate governance
|
Easier for investee to go dark with fewer registered owners.
|
More difficult to avoid mandatory disclosures.
|
Tata Motors, Reliance Industries, and Tata Power were the top gainers on both indices, while ITC and Larsen & Toubro lost the most.capitalstars
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