When a customer purchases shares of company stock and the ownership is registered in the customer's name, the actual stock certificate for that purchased security is delivered directly to the customer. The certificate, in turn, must be relinquished when the equity is sold. A broker-dealer may hold shares in street name on behalf of the customer, which facilitates the sale, because the certificate does not have to be physically transferred from the customer to the broker in order to complete the transaction.
When shares are held in street name, the broker dealer is responsible for their safekeeping. This avoids the hassles of lost stock certificates. Lost certificates can be replaced but not without considerable difficulty.
Shares held in street name are apportioned to the various account holders of the firm by the broker's accounting system. Street name shares are also available to the broker who may loan them out for sale by short sellers. Failure to recover shorted shares is one of the losses protected by SPIC insurance on a brokerage account. The broker receives interest for loaning the shares, and the short seller pays any dividends due on the shares, but the broker may not be able to recover them especially in the case of a major calamity such as a market crash.
Shares held in street name in a brokerage account can be "ordered out" to request that certificates be issued and mailed to the owner. Some brokers charge service fees for this transaction.
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