Share Certificate or No Certificate - Which is Better for You?

An Acceler8now.com Investing Education Resource July, 2007

Pre-CSCS (the Central Securities Clearing System), this question didn't need to arise, because every shareholding was evidenced in a certificate, which the shareholder held until he chose to sell the stock. Today that is different: you can choose to keep your certificate or dump them with the CSCS. The later is technically referred to as dematerialisation which means throwing away that material (physical) evidence of your holding and going for electronic records. Even the current question may only be valid for a while, because, given the trend towards increased use of technology for documentations, certificates may one day disappear completely. For now you have a choice. So, which is better for you?

The important point to make here is that initial fears expressed by shareholders, about holding shares without certificates, have since been proved unfounded by the operation of the CSCS. It's been smooth by every indication and those who place their stock into a CSCS account have never missed the certificates.

What You Gain By Keeping a Certificate
Beyond seeing a fancy document, it's difficult to identify any additional benefit that comes from keeping your certificate. If it is to use it as a borrowing collateral, that can also be done neatly with your CSCS statement. If it is for security, it's more likely to get lost or burnt (though you can go through the hassle of a replacement). To cut it short, there is nothing your certificate does that you are disadvantaged with, using the CSCS

What to Gain By Placing in CSCS Account
The most crucial is the fact of substantially enhancing the speed at which you sell, a factor that is critical in a constantly moving market. When you transfer your holdings to a CSCS account, the share verification process goes with it. This means that the registrar certifies that you own the shares (by signature verification) before it gets into your personal account at the CSCS. If you urgently have to sell, the verification process, which could cause traumatic delays, is already concluded. The stockbroker could sell on the same day. If someone else still has a certificate, he could be on the verification process while price moves against him, for instance. CSCS puts you in ready mode for sales and that's a big factor in the stock market.

Even when you seek to borrow, using your shares, a CSCS account will speed things up, too. The reason is that your banker (or other lender) will also want the certificates verified. While this could drag, a CSCS account gets you going immediately.

With CSCS, the storage and handling problem is off you. A periodic statement helps you keep track of your account. If you need additional protection, a CSCS Special account will provide it. Besides, there is the trade alert system.

All said, the era of keeping share certificates should be in the past. We don't think you still need them for anything, unless you just want to slow up your transactions for no benefit. Get your stocks into a CSCS account and enjoy the flexibility of doing your transactions on the fly.