Stock and Bond Certificates

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Stock and Bond Certificates

The law has acknowledged bits of tablecloth and the back of napkins as both suitable for contracts as well as proof of ownership in an enterprise.  However, these forms of construction of  documents are not suitable for publicly traded stocks and bonds.

Publicly traded stocks and bonds have  specific certificate construction requirements.  While these specifications vary to a degree, they are unanimous in the aim of making the document resistant to counterfeiting, alteration and deterioration.

Counterfeiting stock certificates is almost as old as counterfeiting currency. The same techniques in printing currency are used in printing certificates.  Techniques such as intaglio inks, fine line detail and micro printing to thwart copying as well a printing on sizes of paper that are not standard sizes thus any effort to counterfeit would at least require  copies that handled oversized paper.  The paper upon which the certificate is printed is often a feat of engineering in its own right.  The paper often contains security threads, gradations in colors, textures and watermarks.  The paper is acid free  allowing the document to survive for literally hundreds of years without  paper degradation.   Can you imagine stock certificate printed on paper that over time crumbles like the paper used to print cheap paperback books?

To make alteration more difficult all ownership information is printed with security inks.  Inks that both penetrate the paper as well as possess some other property such as ultra violet florescence to set them apart from copy shop inks.

Also it is a requirement that these certificates have an independent transfer agent.  The transfer agent is an agent of the secretary of the corporation or state that has been empowered by the issuer to take certificates that have been sold or transferred  and issue new certificates as well as maintain current records of the ownership and addresses of the owners.

These certificates will almost always contain a CUSIP (Committee on Uniform Securities Identification Protocol) number for ease of identification of the issuer and history.

Both stocks, but in particular bonds have lengthy disclosures on the certificates about the nature of the security, the rights of the owner of the security and an owners restrictions.  Furthermore, as these are written by counsel and reviewed and edited many times they typically are not resplendent and are full of spelling and grammar errors.

Bonds are issued in $1,000 denominations.  At one time there were baby bonds, bonds issued in $500.00 denominations but we have not seen this since before the Carter Administration.  Also all bonds, even foreign government bonds, issued since the 1980’s are issued in electronic format – e.g. – there is no actual physical bond.

Be suspicious of these faulty certificates.  Be even more suspicious of these faulty certificates when they come with many fancy documents of authenticity.

At Aegis Journal we receive many different bonds and stock certificates asking if the bonds are real.  When we say no, the reader often responds with several letters from unknown parties that possess all sorts of titles and stamps, that indeed these documents are real.

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