What is the Transfer Agent Direct Registration System (DRS)?

The Depository Trust Company (“DTC”) offers a service to transfer agents known as the Direct Registration System (“DRS”).  DRS allows transfer agents to provide shareholders with the ability to hold their shares in book-entry form with the transfer agent instead of a physical stock certificate. A DRS Statement evidences ownership of the security and replaces the physical stock certificate.  DRS shares are represented by a DRS Statement in the name of the shareholder. The shareholder has full ownership of the shares and has all rights and privileges of share ownership. The Direct Registration Statement serves as evidence of ownership of the shares as opposed to a physical certificate.

Shares held in DRS are transferred between the issuer’s Transfer Agent and holder’s broker-dealer electronically.

Benefits of the Direct Registration System – DRS 

There are numerous benefits to holding shares in DRS:

• DRS eliminates the risk associated with lost, stolen, forged or counterfeit securities;
• DRS eliminates the need for transfer agents to (a) maintain a supply of certificates for each issuer, (b) examine physical certificates and read medallions and (c) perforate, store, and eventually destroy cancelled certificates
• DRS eliminates delays associated with the handling of physical stock certificates because it allows shares to be transferred between the issuer’s Transfer Agent and holder’s broker-dealer electronically;
• DRS streamlines the processing of new issuances of stock associated with corporate actions such as stock splits, reverse splits, mergers etc.;
• DRS reduces costs associated with paper certificates including printing, storage, insurance, and postage and;
• DRS reduces time required to process lost certificates and related shareholder inquiries; and
• DRS reduces processing time associated with paper certificates.

DRS allows a shareholder to authorize their broker to send an electronic instruction to the issuer’s transfer agent to debit DRS shares from their account and deliver the share electronically to their brokerage firm account. DRS streamlines the processing of securities and reduces the burdens associates with physical stock certificates.

Issuers that act as their own transfer agent, transfer agents and DTC participants can use the service. Issuers and transfer agents must participate in DTC’s Fast Automated Securities Transfer (FAST) Program as well as open a Limited Participant Account (LPA), prerequisites to establish the DTC connectivity required for DRS. Prior to offering DRS, a participant is required to participate in either a Surety or Insurance program approved by DTC, or provide proof of similar coverage from an approved surety/insurance provider.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com