Jill M. Considine, chairman and CEO of The Depository Trust & Clearing Corporation said that by eliminating its legal requirement that companies issue paper stock certificates, Delaware’s state legislature will save investors and companies millions of dollars a year.
Delaware was one of five states still requiring public companies incorporated in the state to issue paper certificates for equities, which are the last financial instruments still using physical ownership records. Virtually all other securities today – including corporate and municipal bonds, U.S. government securities, money-market instruments, futures, options and mutual funds – are issued and traded in a paperless, electronic format that allows for automated processing and safekeeping.
“This is a significant step in the national drive to eliminate paper stock certificates,” Considine said, “because more than half of all publicly traded companies in the United States and almost three-fifths of Fortune 500 companies are incorporated in Delaware.”
Paper stock certificates cost companies, investors, banks and brokers hundreds of millions of dollars each year to print, register, ship, examine, file and keep safe, even though they’re involved in only about one-tenth of one percent of all trades daily on U.S. markets. One study, released by the Securities Industry Association (SIA) last year, puts the annual cost of handling paper stock certificates at $250 million or more.
“We believe Gov. Ruth Ann Minner’s signing into law the amendments approved by Delaware’s legislature earlier this month will have an effect nationwide,” Considine said. “DTCC will continue to work with the SIA to help eliminate paper certificates in the other states that still require them.”