Book entry securities allow for ownership without physical certificates, reducing paperwork for investors and brokers. The process simplifies record keeping and eliminates the need for hard copy replacements. Electronic versions are also available.
Paper securities are securities recognized as belonging to a particular owner, without the creation of a physical stock certificate. Evidence of ownership of these types of securities is found in related entries found in the official records of the issuer of the security. Secure accounting has enjoyed great popularity, as the process allows owners to hold shares of stock without being burdened with keeping up with paperwork.
Brokerage firms also appreciate the secure accounting process. Just as the strategy helps keep paperwork to a minimum for the investor, an accounting security results in less documentation to file and maintain for the broker tasked with managing the asset. The process followed when stock is sold can illustrate one of the ways record keeping is streamlined. Instead of having to invalidate hard copies of the shares and arrange for them to be reissued to the new owner, the process requires a simple verification of the sale of the shares. Once verification is complete, the broker simply updates the records to indicate a change in ownership of the security, effective on the date the purchase is completed.
Another general benefit to book entry security is that neither the owner nor the broker need worry about going through the substitution process that can occur with paper copies of shares. Because hard copies can be lost, damaged, or stolen, a process must go through to replace them. With the book entry security method, there are no hard copies to replace and no problems with maintaining ownership rights and privileges.
More recently, it has become common to prepare electronic versions of various treasuries. The electronic treasury bond or share can easily be forwarded to the owner in the event that a paper copy of the account security is required for some reason, while still allowing both the owner and the broker to enjoy all the benefits associated with the book – security in entrance.
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