Why Would You Transfer Stock?

by | Jul 2, 2012 | Financial Services

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Why does it mean to transfer stock? Stocks are assets which can be bought and sold, and like most other assets there is a paper trail in place to prove that the ownership of those assets is legitimate. As with any asset though, a stock can be sold, and when it’s sold you would need to see someone transfer stock into the name of the new owner.

Stocks, being assets, are bought and sold for various reasons. Companies sell stocks either privately, or on the open market if they trade publicly, in an effort to raise capital. That capital would be used to either buy assets or would be used to invest in the business so that it can be used to generate further profits. Every stock purchased is a small piece of that company, with the value of the stock rising and falling based on the demand for that particular stock.

Who Would Transfer Stock?

If a person wishes to sell their stock or transfer the ownership of that stock to another person, they need to transfer stock as a transaction. When a company needs to transfer stock, they would normally use a stock transfer agent. This stock transfer agent will transfer stock by managing the master shareholders listing. Typically only one company is responsible for this, and any time there is a need to transfer stock from one owner to another, this company would handle the administration associated with that.

The stock transfer agent will provider shareholder proxy services too, assisting the company in managing its annual shareholder meetings or special shareholder meetings that were called by the board. They manage all the corporate shareholder information and complete records. Without stock transfer agents, it would be incredibly difficult to keep track of the owners of the stock, be they private investors or institutions.

Banks normally provide this service, although over the last few years’ stock transfer services have come from companies that specialize in electronic services related to the administration of stocks and market instruments.

There is a legal requirement for independent stock transfer agents. If a shareholder wishes to transfer stock, the entire process is handled and coordinated by an independent company with no influence or advantage to be gained from the trade itself. This is incredibly important for shareholder transparency, while at the same time provides a comprehensive audit trail if ever required.

In the USA when there is a need to transfer stock, stock transfer agents use a signature guarantee. This guarantee is used to certify the validity of the person who sold the stock and it basically acts as an endorsement of the sale itself. This provides protection for the company whose stock is being traded, along with other shareholders, and it ensures that the stocks being sold are indeed legitimate and being sold by the legitimate owners.

If you need to transfer stock and you are looking for a stock transfer agent, consider Colonial Stock, who can be found at colonialstock.com

Transfer Stock?

Transfer Stock?