The U.S. Securities and Exchange Commission (SEC) issued a bulletin on Friday, alerting investors to the need to safeguard securities certificates, and detailing its program for dealing with lost, stolen, or counterfeit certificates.
The SEC’s Office of Investor Education and Advocacy says it issued the notice to help educate investors about lost and stolen securities, and about the commission’s database of certificates that are reported lost, stolen, missing, or counterfeit.
The notice indicates that vast quantities of cancelled securities certificates have been generated in recent years, both due to an active stock market, and the fact that many corporate bond issues have been called for redemption early. These certificates can, in turn, be stolen and used in frauds.
“In many cases, the stolen certificates have reentered the marketplace either through sales or as collateral for loans, resulting in fraud on public investors, public companies, creditors, broker-dealers, and transfer agents,” it says. “Not only do situations such as these present potential liability for the transfer agents responsible, but they consume the resources of regulatory and criminal law enforcement agencies.”
As a result, the SEC has set up a database to track lost, stolen, missing, and counterfeit certificates, which is operated by the Securities Information Center (SIC). It reports that, as of December 31, 2011, the database included securities with a total value of approximately $801 billion.
The notice advises investors who are holding certificates directly to safeguard them from theft or loss. And, that if that happens, it should be immediately reported to the transfer agent and their broker, who can report the certificate missing. Additionally, it recommends that investors keep a copy of both sides of their certificates separate from the certificates themselves, so that ownership can be proven if a certificate is lost or stolen.