1. Definition of a Stock Record
2. Purpose of the Stock Record Department
3. Definition of a Stock Register
4. Updating the Stock Register

The purpose of stock register is to keep track of companies' issued stocks and assist in inventory management.

Definition of a Stock Record

A stock record contains information about securities that are held by a brokerage firm. This record should against every time the firm makes a trade.

The following information is in the stock record:

  • Names of the real owners
  • Names of the beneficial owners
  • Amounts of the securities held by the brokerage firm
  • Locations of the securities held by the brokerage firm

Brokerage firms hold securities for investors in street name. For this reason, it is crucial that firms keep thorough records of the true owners of the shares.

With the new technological advancements on Wall Street, paper certificates are no longer needed. Additionally, when stock records hold securities in street name, brokerage firms do not need to provide paper securities to the investor. These new processes made transactions easier and decreased the amount of time needed during trades.

Rules 17a-3 and 17a-4 of the SEC provide three minimum requirements regarding the following:

  • Establishing the records
  • Keeping the records current
  • Determining the amount of time the records must be held

These rules allow for SEC audits and also assist in guarding customers from harm.

Purpose of the Stock Record Department

The stock record department is responsible for keeping updated records. For every security traded, the stock record department must determine the following information:

  • Name of the owner
  • Amount of stock
  • Location of holding or deposit of the security

Stocks can be held on deposit at the Depository Trust Company (DTC). If this is the case, the stock record department must reconcile its books to the DTC's books. Any disagreements concerning these reconciliations can occur and be discussed at the following time intervals:

  • Daily
  • Weekly
  • As-needed

Furthermore, the stock record department is in charge of handling any processing errors such as breaks or exceptions of records that were erroneously transacted.

Definition of a Stock Register

The purpose of the stock register database is to keep a record of the history of a company's security trades. This database also records details concerning a company's stock as well as information regarding a company's stockholders.

Publicly traded companies must maintain a precise and complete register at all times so that the company can fully trust the information it holds pertaining to its stock and shareholders. Data going into a stock register includes live updates of incoming stock purchases and outgoing stock sales. The following information is in a stock register:

  • Information concerning stock trades
  • Stock buybacks
  • Stock retirements

This information provides the company with the ability to know the number of outstanding share at any point in time.

A stock register assists companies in the following areas:

  • Inventory management
  • Shortage prevention
  • Product supply maintenance

Each share held by a shareholder is given a select number that is used to locate the share. By using this number, the following information is determinable:

  • Owner's name
  • Owner's address
  • Par value of the stock when purchased
  • Issuing dates
  • Purchasing dates

Including issuing dates and purchasing dates allows companies to follow the history of its stock. To keep this information accurate, stocks require re-registration after a sale to new owners. Information concerning the transfer and the new owner requires an entry into the database.

The stock register is a valuable asset in situations of loss or theft. If a stock certificate needs to be replaced, the stock register provides the information needed and also assists in verifying that the claim is accurate.

Updating the Stock Register

The individuals responsible for managing the stock register are also required, to the best of their abilities, to keep it updated and accurate. The shareholders or investors are responsible for verifying that the stock register information is right.

If shareholders' or investors' names or addresses change, they must provide the register with the updated information in order to vote and receive dividends. If the information is not kept up-to-date, problems may arise during transfer as well as during other various processes. For example, if a loss occurs and the register does not have updated information, extensive paperwork is necessary to prove ownership.

If you need help with understanding the purpose of stock register, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.