Dirty stock refers to stock with irregularities in supporting documents, causing transactions to halt until issues are resolved. Good delivery status requires verified documentation, minimizing illegal sales. Dirty deeds are often due to omissions or errors, but can be resolved quickly.
Dirty stock is any type of stock problem that is not considered to have good delivery. When a stock is identified as dirty, the transaction stops while the status of the stock is evaluated. Any problems encountered must be resolved before soiled stock is assigned good delivery status. It is only after any outstanding issues have been corrected that the transaction can resume and be completed.
The dirty stock status is due to some irregularities in the supporting documents confirming the veracity of the stock. Before ownership of shares of stock can be transferred from the current owner to the new owner, it must be ensured that all endorsements and other legal documentation are in order. Checking the status of these document types is a standard process in any inventory transaction.
When it is discovered that there is something wrong with the transfer documents or endorsements, the progress of the transaction ceases. At this point, the stock is identified as dirty and the process of obtaining the required documents or endorsements begins. Once all documentation has been corrected, modified or added, the status of the transaction is reviewed. If the review results indicate that there are no remaining problems with the stock, the dirty stock status is changed to a good delivery status and the transaction moves to completion.
The dirty stock concept is a means of making sure that stock transactions are conducted in a smooth manner and that the opportunity for illegal or unethical sales is minimized. Since good delivery status requires all documentation and approvals to be verified and found to be in order, it is extremely difficult today to transfer stock with questionable pedigrees. As a result of this dirty stock procedure, buyers are somewhat protected from losing a large amount of money by buying shares of stock.
Often, the incidence of dirty deeds has nothing to do with an overt attempt to defraud someone. It is much more likely that the simple omission of some supporting documents or possibly incorrect wording or information was introduced in the documentation. These types of issues can normally be resolved in no time, allowing the dirty stock to gain a rating as a good delivery and allow the transaction to proceed.
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