Uncertified securities Are investments such as stocks and bonds, the ownership of which is registered electronically. Uncertified securities eliminate the need to issue paper certificates of ownership. Ownership of securities is never physically transferred upon purchase or sale; accounting records simply change in the books of commercial financial institutions in which investors keep accounts.
According to Art. 965 of the Swiss Code of Obligations (“CO”), a security is an instrument to which a right is assigned in such a way that it cannot be exercised or transferred without a corresponding certificate. Certified or “securitized” shares issued in the form of negotiable securities usually exist as physical documents. Unlike uncertificated securities within the meaning of Art. 973c CO are fully dematerialized securities, meaning they have no physical form. Share-limited companies are free to choose the form in which they want to issue their shares (negotiable or non-documentary). However, the issuance of uncertified securities requires appropriate legislative regulation.
Digital shares are usually issued as uncertified securities. This is mainly due to the fact that the use of paper in digital ecosystems seems to be ineffective.
Undocumented shares are mutual funds that are treated as shareholder property. However, no paper certificates of shares are issued. Instead of a share certificate, proof of ownership of the uncertified shares is stored in the records of the transfer agent who processed the purchase transaction.
Undocumented shares have the same legal rights and privileges as any shares certified by an official certificate. The owner of uncertified shares can trade shares at will, as well as purchase additional shares of the same shares. Proof of ownership of shares can always be obtained by requesting documentation from a transfer agent. In addition, the broker who maintains the portfolio for the investor will also be able to document the current value of the stock based on the latest trading activity.
The issuance of uncertified shares covers many different types of investments. Also known in some circles as balance sheet shares, stocks can represent almost any class of stocks available in the market today, including stocks that are issued as part of retirement plans or employee shareholding plans. The book share has long been a common instrument in the investment market and derives its name from the fact that actual ownership of the shares is established in the records of a broker or agent.
Whether the investment is represented by a certificate or a separate line in the financial statements, the carrying amount will trade with the same level of ease. Investors wishing to purchase uncertified shares can do so with no additional effort.
In fact, many investors choose to buy uncertified securities for the simple reason that less paperwork is required. Brokers and other financial advisors can help new investors find potentially profitable investments that are represented by uncertified shares and explain the benefits of this approach.