Computershare is a proactive participant in the financial industry’s effort to reduce the number of stock certificates in circulation – known as “dematerialization.” In addition to the reduced risk of loss or fraud that comes from eliminating paper certificates, transfers and other investor transactions are conducted more efficiently with book-entry shares. Issuing fewer certificates will also reduce the number of lost certificates – and the number of shareholders who are required to pay for an indemnity bond to replace the certificates.
The efficiencies provided through dematerialization are also important in preparing for reducing the settlement cycle from its current T+3 (trade date plus three days) turnaround time to T+2, which will reduce risk, limit exposure, and improve efficiency. T+2 is already standard in the European Union and the U.S. is strongly considering the same1
– making paper certificate issuance a significant challenge.
To help encourage shareholders to move away from paper certificates, Computershare is introducing a shareholder-paid charge for certificate issuance, which began on December 15. A certificate issuance charge of $40 will be assessed when a shareholder requests a certificate from a customer service representative, or $25 when using the Investor Centre™ website. Of course, there is no such charge for book-entry issuance.
Certificate issuance charges are not unusual within the industry. Brokers may charge as much as $500. Reducing the number of certificate requests from shareholders will not only help move the US marketplace toward dematerialization, it will also help reduce issuer costs associated with volume-related certificate ordering, storage, or production including mailing costs.
Transfer forms now include a notice that shares will automatically be issued in book-entry form via the Direct Registration System, if available, and that shareholders can obtain a certificate, if available, via the Investor Centre website or by contacting us. The form also states that a charge may apply to issue the certificate.
Where no-cost certificate issuance is a provision of a direct stock purchase or dividend reinvestment plan, there will be no charge for certificates requested via the website, through our interactive voice response telephone system, or in writing.
Callers speaking with a live customer service representative will be advised of those options; if they choose to have the representative issue the certificate they will incur the $40 charge.
In addition, the charge will not apply to client mass issuance requests, special company requests, or restricted stock issuances. We encourage clients to work with their client service teams to utilize book entry options for those circumstances, in order to continue to support dematerialization in the US market.
We trust our clients will share our enthusiasm in this important move towards further industry dematerialization, and we encourage Computershare clients who have additional questions to reach out to their client service team.1 On October 16, DTCC announced the formation of a Steering Committee and Working Group who will focus on the move to T+2. See the announcement here.