S T O C K    E X C H A N G E

 

The New York Stock Exchange (NYSE) was long organized as a "voluntary organization, neither partnership nor corporation. The effect from a legal standpoint was to eliminate possible claims against individual members in case of a major financial debacle. The previous Board of Governors was replaced by a Board of Directors. The public directors include several chief executives of listed corporations, so it should not be presumed there is a significant board presence from consumer groups, public service organizations, and so on. At least one of the public directors must be associated with a financial institution that is a substantial investor in equity securities. The industry directors include seven from firms dealing with the public, three specialists, and one floor broker. The remaining industry director must represent a firm not dealing on a national basis, typically an arbitrage house, research boutique, or other specialty firm. Half of the industry directors representing public firms must be affiliated with firms not based in New York City. This distribution pattern is intended to protect the exchange community and the public from domination by parochial interests.

This is stock that has been purchased by the customer but left in the broker's name, hence (Wall) "street name." The customer is said to be the beneficial owner although the broker is the record owner, that is, the broker's name is on the transfer agent's record as the owner. The customer is not known to the transfer agent. Thus all communications such as proxy (voting) material, quarterly and annual reports, and, of course, dividends will be sent to the broker who in turn must promptly forward them to the customer, or credit the customer's account with any cash or property received. This format greatly simplifies the transfer process as the shares do not have to be shipped back and forth between customer, broker, and transfer agent. Not being in the customer's name to begin with, they do not have to be signed by the customer and delivered to the broker to complete delivery.

TECHNIQUES   OF   STOCK   TRANSFER

There are two aspects to the transfer of title to stock:

1. The transfer is accomplished by the delivery of properly endorsed certificates.

2. The transfer is recorded on the books of the issuer.

In most cases, the broker acts as the customer's intermediary and handles the details necessary to complete the transfer from the previous owner and shipment to the new owner. More rarely, some customers may request that the broker transfer ownership to them but retain the certificates in safekeeping. In this case, the customer receives payments directly from the issuer but must still sign the certificates to make them negotiable when sold. The service is a costly inconvenience to brokers and is not of freed by some. where offered, the broker usually charges a substantial fee for the service.