What is DRS and Why It’s Important

The Internet and the World Wide Web will go down in history as the two most disruptive technologies. They have had a profound impact on our way of life. It has affected how we communicate, do business, and even entertain ourselves. It has also transformed how we invest.

There are two standard methods investors use to hold their shares. They have a physical share certificate or use a broker. But with the global stock market going digital, there’s now a third option. Shareholders can use a DRS.

What is DRS?

DRS is an acronym for Direct Registration System. It’s a system that lets registered securities become held in digital form. Shareholders won’t need to hold on to a physical security certificate as evidence. They also won’t need a bank or broker to hold onto their stocks.

Shareholders have the luxury of registering securities to the company’s books. They also have the option to do a digital transfer straight to the transfer agent. There’s no physical certificate, so the investor will receive an account statement. The issuer or transfer agent will send it at a specific period. For example, the statements are now released once a year. Aside from that statement, the transfer agent will also mail other documents. They will also send out dividend/interest payments and proxy materials.

Reasons to Use Direct Registration System

DRS is available to many of the listed companies in the USA. AMC and GameStop are two companies known for using DRS shares. Experts believe that more companies will be moving to this system soon. After all, the direct registration system comes with certain advantages.

It’s Safer Than a Certificate

Paper stock certificates can become lost or stolen. They’re also easy to damage or destroy. You won’t have to worry about that happening with DRS. That’s less stress on your end. You’re assured that your shares are secure.

Digital is Cheaper Than Paper

Having a DRS stock is more affordable in the long run. Brokers will tell you to insure your stock certificate when having it mailed. This usually costs about 5% of the share’s market value. It’s an out-of-pocket expense. It’s also an approximation of what the transfer agent will bill you to replace the certificate.

There’s no danger of losing your share certificate with DRS. Everything is digital so the data is already saved in a secure location. You can access it anytime you need.

You’re Well-Protected Against Risk

A DRS stock protects you against counterparty risk. This refers to the chance that the other party will default in the transaction. Think of the counterparty as your opposite in the transaction. For example, a seller is the counterparty to the buyer. There’s a risk that a buyer would send payment but the seller won’t deliver the goods.

Counterparty risk is also a worry in investments. After all, a company can go bankrupt. Or their shares could drop. When this happens, you’ll go through a recovery procedure. This happens via SIPC insurance if your stocks are using a street name. It’s the same process if your stockbroker went bankrupt. The ideal outcome here is you’ll get a reimbursement.

You Get Your Documents Without Delay

There’s one drawback to the traditional way of holding stocks. It is a slow documentation process. Stockbrokers are notorious for the slow delivery of annual reports. You have to wait ages for proxy statements from your investments and 10k filings.

It’s different with a direct registration system. Transfer agents are often prompt in mailing your documents to your recorded address.

DRS Enjoys a lot of Support

DRS complements the securities industry’s move towards statement-based share ownership. It also has the approval and support of the Securities and Exchange Commission. It’s also supported by the New York Stock Exchange.

Providing Customized and Effective Stock Solutions

Time is of the essence in today’s business world. You can achieve more with less with Legacy Stock Transfer, Inc. We are one of the premier full-service stock transfer agencies in the country. That’s quite an achievement for a family-owned business. We’re stalwarts in the investment industry. We’ve been in the business for three decades. We’re a reliable transfer agent registered with the SEC. We’re also in good standing with the Securities Transfer Association. Our company has the authority to use DWAC and DRS. We’re also authorized to use FAST systems. You can call us at 972-612-4120. You can also email us here.