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| '''Book entry''' is a system of tracking ownership of ] where no ] is given to investors. In the case of book-entry-only (BEO) issues, while investors do not receive certificates, a custodian holds one or more global certificates. Dematerialized securities, in contrast are ones in which no certificates exist |
'''Book entry''' is a system of tracking ownership of ] where no ] is given to investors.<ref>See Black’s Law Dictionary 74 (2d Pocket Ed. 2001.)</ref> Several terms are often used interchangeably with "book entry" shares including "paperless shares", "electronic shares", "digital shares", "digital stock certificates", and "uncertificated shares". Some of these terms have somewhat different connotations but, at least in the United States, state securities laws only recognize certificated and uncertificated shares.<ref name=2ways>{{cite web|title=2 Ways to Issue Paperless or Electronic Stock Certificates Including a Free Option |url=https://discover.shareworks.com/startup/2-ways-to-issue-paperless-or-electronic-stock-certificates-including-a-free-option |publisher=Shareworks.com |accessdate=8 December 2021}}</ref> In the case of book-entry-only (BEO) issues, while investors do not receive certificates, a ] holds one or more global certificates.<ref name=MSRB>{{cite web|title=BOOK-ENTRY ONLY (BEO) or BOOK-ENTRY SECURITY|url=http://www.msrb.org/msrb1/glossary/view_def.asp?param=BOOKENTRYONLY|publisher=Municipal Securities Rulemaking Board|accessdate=13 June 2012}}</ref> ], in contrast, are ones in which no certificates exist; instead, the security issuer, its agent or a ] keeps records, usually ] of who holds outstanding securities.<ref name=MSRB /> | ||
| Most investors who use an online ] or even a regular full-service broker will have their shares held in book-entry form. This is generally convenient, as one does not have to preserve physical stock certificates, and can buy/sell securities without turning certificates in or having new ones issued. Also, replacement costs for certificates are high in case one loses them, while book-entry ownership can never be lost thanks to technological backups. | |||
| ⚫ | ] | ||
| ==Direct Registration System== | |||
| {{See also|Clearing House Electronic Subregister System}} | |||
| On August 8, 2006, the ] approved a rule changed by ], ] and ] requiring all listed securities (except certain debt securities) to be eligible for a direct registration system ("DRS") as of March 31, 2008. DRS is an entirely electronic book-entry style system that does not involve physical stock certificates. The rule change does not eliminate physical certificates, but requires issuers to be eligible for entirely electronic recording of securities ownership. | |||
| ==Private companies== | |||
| ⚫ | {{ |
||
| Adoption of book-entry systems among private companies has lagged adoption among public companies, public company transfer agents, and broker-dealers.<ref name=2ways/> This may be due to a number of misunderstandings and challenges unique to private company security issuance but, regardless, data suggest adoption of book-entry systems among private companies is growing rapidly.<ref>{{cite web |title=Pitfalls of Issuing Electronic Stock Certificates for Private Companies and How to Avoid Them |url=https://discover.shareworks.com/a-private-company/pitfalls-of-issuing-electronic-stock-certificates-for-private-companies-and-how-to-avoid-them |publisher=Shareworkscom |accessdate=8 December 2021}}</ref> | |||
| == References == | |||
| ] | |||
| {{reflist}} | |||
| ⚫ | ] | ||
| ⚫ | {{Stockexchange-stub}} | ||
Latest revision as of 23:30, 1 August 2024
 | This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Book entry" – news · newspapers · books · scholar · JSTOR (February 2009) (Learn how and when to remove this message) |
Book entry is a system of tracking ownership of securities where no certificate is given to investors. Several terms are often used interchangeably with "book entry" shares including "paperless shares", "electronic shares", "digital shares", "digital stock certificates", and "uncertificated shares". Some of these terms have somewhat different connotations but, at least in the United States, state securities laws only recognize certificated and uncertificated shares. In the case of book-entry-only (BEO) issues, while investors do not receive certificates, a custodian holds one or more global certificates. Dematerialized securities, in contrast, are ones in which no certificates exist; instead, the security issuer, its agent or a central securities depository keeps records, usually electronically of who holds outstanding securities.
Most investors who use an online broker or even a regular full-service broker will have their shares held in book-entry form. This is generally convenient, as one does not have to preserve physical stock certificates, and can buy/sell securities without turning certificates in or having new ones issued. Also, replacement costs for certificates are high in case one loses them, while book-entry ownership can never be lost thanks to technological backups.
Direct Registration System
See also: Clearing House Electronic Subregister SystemOn August 8, 2006, the SEC approved a rule changed by NASDAQ, NYSE and AMEX requiring all listed securities (except certain debt securities) to be eligible for a direct registration system ("DRS") as of March 31, 2008. DRS is an entirely electronic book-entry style system that does not involve physical stock certificates. The rule change does not eliminate physical certificates, but requires issuers to be eligible for entirely electronic recording of securities ownership.
Private companies
Adoption of book-entry systems among private companies has lagged adoption among public companies, public company transfer agents, and broker-dealers. This may be due to a number of misunderstandings and challenges unique to private company security issuance but, regardless, data suggest adoption of book-entry systems among private companies is growing rapidly.
References
- See Black’s Law Dictionary 74 (2d Pocket Ed. 2001.)
- ^ "2 Ways to Issue Paperless or Electronic Stock Certificates Including a Free Option". Shareworks.com. Retrieved 8 December 2021.
- ^ "BOOK-ENTRY ONLY (BEO) or BOOK-ENTRY SECURITY". Municipal Securities Rulemaking Board. Retrieved 13 June 2012.
- "Pitfalls of Issuing Electronic Stock Certificates for Private Companies and How to Avoid Them". Shareworkscom. Retrieved 8 December 2021.
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