Protect Your Investment with a Lost Stock Certificate Affidavit

Protect Your Investment with a Lost Stock Certificate Affidavit

by Brette Sember, Esq., June 2019

If you want to sell or transfer stock but have lost your paper stock certificate, you have no legal proof of ownership—but that doesn't mean you've lost your investment. With a properly completed lost stock certificate affidavit, you can transfer or sell the stock even if you can't find the original certificate.

Understanding Stock Certificates

A stock certificate is a hard-copy legal document that confirms your ownership of a stock. It lists your name, the number of shares you own, and the certificate number. Hard-copy stock certificates used to be the only way to prove ownership.

Today if you buy a stock online, it's unlikely you'll ever have a hard-copy certificate since digital registration is now the norm. You can request one if you'd like, but if you do, that piece of paper becomes your official designation of ownership: you can only have paper or digital authentication, not both. If you request the hard copy, make sure you keep it in a safe place. It's also possible that you or a relative you inherit from has a hard-copy certificate laying around and, if so, it's important to take the necessary steps to protect it.

Protect Your Stock Certificates

If you hold paper stock certificates, it's important to understand that they are valuable and should be kept in a safe place, such as a home safe or a bank safe-deposit box. You also need to remember where they are stored so you can locate them in the future, and be sure to tell your spouse, partner, or children where you are keeping them. You can also ask your brokerage firm to store the certificates for you or to convert your paper certificates into a digital registration, so that you don't have to worry about holding onto the originals.

It's a good idea to make copies of both sides of your paper certificate and either keep a digital copy or store paper copies separately from where you keep the originals. It's critical that you have the information from the document because, without the certificate number, it can be very challenging to get a replacement.

When to Use a Lost Stock Certificate Affidavit

If you misplace your stock certificate or believe it was stolen or destroyed, you should immediately contact your transfer agent, or business that handles the records for the company of the stock you hold, and request that a "stop-transfer" order be put against it, similar to what you would do with a lost check. The missing certificate will be reported to the U.S. Securities and Exchange Commission (SEC).

The next step is to immediately complete and submit a lost stock certificate affidavit, which acts as an application for a new certificate. Because a stock certificate is your only legal proof of ownership, you can't sell or transfer the stock without it. Once the affidavit is completed, have your brokerage firm ask the company whose stock you hold to issue a new stock certificate, which you can then keep or use to sell or transfer the stock as you wish.

How to Complete a Lost Stock Certificate Affidavit

While there are many do's and dont's when it comes to filling out an affidavit, the process is rather straightforward. The affidavit usually asks for such information as:

  • Your name
  • Stock certificate number(s)
  • The number of shares
  • The type of shares
  • Issue date of the shares
  • How the certificate became lost and what you've done to find it
  • The name of the company in which the stock is held
  • Your signature
  • Date of signature

You will also most likely need to have the affidavit notarized.

Lost Security Bond

An important part of the affidavit is the indemnity, or hold harmless, agreement, which states that you will indemnify the company if someone later turns up with your certificate and sells it. To keep this promise, you need to buy a lost security bond, also called a lost securities surety bond, which you can purchase from a surety bond company. The bond usually costs between two and three percent of the current market value of the stock owned.

A bond of this type offers protection to the transfer agent or issuer in case your original certificate does resurface and is sold or transferred by someone who believes they are legally buying the stock. The amount of the bond depends on the type of stock and is set as an open penalty, which means it will cover the variation in value of the stock, since value changes with the market.

A lost stock certificate affidavit is the only way to protect your investment if you lose your original hard-copy stock documents. Completing and submitting the form quickly will help protect you and your investment.