What Is a Stock Record?
A stock record is a master list of the securities held by a brokerage firm on behalf of its customers. The list is updated with every transaction executed by the brokerage.
- Every brokerage is required to maintain a stock record.
- This is a master list of all transactions made on behalf of its clients and is updated with every transaction.
- In an era in which paper certificates are no longer issued, accurate record-keeping is essential.
The stock record displays the name of the real and beneficial owner, the number of shares, and the locations of all securities held by the firm. The stock record is updated every time a trade is executed.
Understanding the Stock Record
A brokerage today buys, holds, and sells shares in its own “street name,” that is, the name of the brokerage rather than an individual client’s name. Behind the scenes, the stock record records the name of the real owner.
That person is known in law as the beneficial owner. That is, the individual is the actual owner of the stock even though its ownership may be recorded under another name, such as a brokerage firm’s name, for recordkeeping purposes.
The Securities & Exchange Commission sets the rules for the creation and maintenance of the stock record.
Before computerized technology arrived on Wall Street, stocks were issued to their owners in the form of real pieces of paper, called stock certificates.
The development of the stock record eliminated the need for a broker to hand over the paper securities to the customer. That greatly speeded up and simplified transactions.
Security and Exchange Commission (SEC) Rule 17a-3 and Rule 17a-4 outline the minimum requirements for record-keeping in terms of their content, creation, and maintenance practices and the length of time the records must be kept.
These rules are intended to protect customers and enable audits for compliance.
The Stock Record Department
Every brokerage has a stock record department that is charged with maintaining accurate records of all of its transactions on behalf of clients.
For each transaction, the stock record department must identify the owner, the quantity of stock, and the location where the security is held or deposited.
Today, most U.S. stock certificates are held at the Depository Trust Company (DTC). This New York City-based company was created in 1973 in order to literally take custody of the business world’s stock certificates.
From that time, it was no longer necessary for stock certificates to be handed over to their new owners. No matter how many times a stock changed ownership, the certificate stayed in place and the change in ownership was recorded. Today, the company continues to operate as a central record-keeper for securities purchases and sales, as well as a clearinghouse for corporate and municipal securities.
The information in the brokerage stock record must match the information at the depository. The stock record departments handle reconciliations for discrepancies on a daily, weekly, or as-needed basis.
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