Paper stock certificates are
colorful and can give
investors a sense of owner-
ship in a company. But
avoiding paper certificates-a
bastion of 19th century technology-is a
serious issue to the industry, because
paper stock certificates have a tendency
to disappear. On average, something like
1.7 million certificates are reported lost,
stolen or counterfeit every year, costing
investors or their financial intermediaries
about $50 million each year to replace.
On 9/11, billions of dollars worth of
paper certificates stored in vaults at the
World Trade Center simply vaporized.
It took months of work with computer
backup facilities and millions of dollars to reconcile ownership records. The safety of securities
held electronically, however, wasn’t threatened at all.
So why does today’s securities industry, which uses
some of the most sophisticated technology available,
still issue and distribute equities the same way it did
two centuries-as pieces of paper?
Download the Congressional Testimony: Paper Torture