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Stock ownership question
Old 07-10-2013, 10:01 AM   #1
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Stock ownership question

I have had an account with a brokerage firm (Schwab) for several years and own several individual stocks. I recently inherited a specific stock where I deal directly with the company instead of going through a brokerage firm. They send me statements each quarter and I am reinvesting the dividends. If I want to reinvest more or withdrawal, I handle it through the mail, which can take weeks. In order to reduce the number of statements I get, I may want to add this stock to my brokerage account. To do this, I assume I just send them the certificates. My question is whether there is any advantage to keeping the ownership the way it is. I know buying and selling is easier and quicker if I go through a brokerage account. I cannot think of any disadvantage of switching my ownership - am I missing something?
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Old 07-10-2013, 10:33 AM   #2
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Do they charge a service fee for the account ? Many companies have DRIPs, no cost to invest but may be service fee, depends on the plan.
Dividend Reinvestment Plans
I had some I got as a gift, transferred to brokerage for convenience.
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Old 07-10-2013, 12:04 PM   #3
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By involving a third-party, the brokerage, you are adding a tiny, but non-zero, amount of risk to the holding. Fraud or other problems at the brokerage could make your stock at least temporarily inaccessible, or even lost beyond what insurance may eventually reimburse you.

Be aware the broker doesn't just file away your stock cert for safekeeping, instead behind the scenes of your account statement the brokerage can actively trade your holding, borrow against it, etc. Those activities are one source of the tiny amount of added risk.
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Old 07-10-2013, 01:31 PM   #4
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I believe, I can be wrong, the stock certificates will be discontinued the next year or two. I think I read this from DTC's site. So if that is the case you will have no choice but to bring to your broker.
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Old 07-10-2013, 04:21 PM   #5
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If it is an individual stock, right after inheritance is a good time to unload since there is little or no gain and you can consolidate your holdings.
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Old 07-10-2013, 05:23 PM   #6
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Quote:
Originally Posted by GrayHare View Post
By involving a third-party, the brokerage, you are adding a tiny, but non-zero, amount of risk to the holding. Fraud or other problems at the brokerage could make your stock at least temporarily inaccessible, or even lost beyond what insurance may eventually reimburse you.

Be aware the broker doesn't just file away your stock cert for safekeeping, instead behind the scenes of your account statement the brokerage can actively trade your holding, borrow against it, etc. Those activities are one source of the tiny amount of added risk.
Actually unless you go with a margin account broker can't do it (at least Vanguard). With a margin account they can loan the stock to a short seller. I don't believe they can really sell it, since that would be a taxable event for the holder of the stock, but one would have to read the brokerage agreement which spells this out. So yes they can loan it out, if it is a margin account. If not a margin account, one would have to read the agreement to see what they can do with it, but in general they can't hypothecate it. (Note that commodities accounts are almost all margin accounts so that explains the MF Global issue, as margin accounts they can hypothecate the securities). One issue to also check is who is the custodian of the funds, be sure its not the same as the brokerage such as happened with Madoff.

Let me add that if you end up owing the broker in a cash account (say by not paying for a stock), again they can sell something. But if you keep a sweep account (money market) then the deficit will come from there if it is large enough.
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