What it means
Most shares today are held electronically in a brokerage account. Some investors still hold paper certificates, and moving them requires a signature.
A stock power lets the owner provide that signature on a separate page. The SEC says securities powers are typically used for convenience when an owner cannot sign the actual certificates, or for safety.
For safety, the owner can send unsigned certificates in one envelope and signed powers in another. The SEC adds that a power looks like the back of a securities certificate and is completed in the same way.
A typical form says the signer assigns and transfers a stated number of shares in a named company, represented by certificate numbers, and appoints an attorney to transfer them on the company's books. A sample form from a transfer agent says the signature must match the name on the face of the certificate.
It also says the signature must be guaranteed and that a notary is not acceptable. The guarantee comes from a Medallion program.
Investor.gov explains that transfer agents insist on signature guarantees because they limit their losses if a signature is forged. A bank, credit union or broker-dealer that takes part in a Medallion program can provide one, and some charge a fee.
The separate page also helps with safety. A certificate that is already signed is easier for someone else to misuse if it goes missing.
Market professionals usually attach the signed powers to the related unsigned certificates only when they process the transfer. Holding shares in street name, meaning in the brokerage firm's name, can avoid the process entirely.
Rules and forms vary by company, country and transfer agent, so ask the agent which documents it needs.
In practice
Real-world examples.
Example
A fictional investor holds paper certificate number 4417 for 200 shares. She does not sign the certificate. She signs a stock power naming the buyer, gets a bank to guarantee her signature, and mails the two documents in separate envelopes.
Example
A fictional heir finds certificates for 500 shares in a drawer, valued at $40 each, or $20,000. To sell, he needs a signed stock power and a signature guarantee from a participating institution. The transfer agent rejects a notary stamp, so he visits his bank.
Example
A fictional founder transfers 1,000 shares to a family trust. The shares trade at $12, so the value moved is $12,000. A stock power, matched to the certificate name, lets the transfer agent update the books.
Formula
Calculation
Value transferred = Number of shares x Price per share. For 500 shares at $40 this is $20,000.
Cost of the guarantee as a share of value moved = guarantee fee / value transferred. If a bank charges a $50 fee for the signature guarantee, the cost is $50 / $20,000 = 0.25% of the value moved.
Envelope split = certificates in one envelope + signed stock powers in another. If either is lost alone, the other cannot be used to move the shares.Case study
Seen in the real world.
This case study is fictional and illustrative. Elena inherits a box of paper certificates for 300 shares of a local manufacturer, last priced at $25. They are worth about $7,500, and she wants to sell. Her broker says certificates must be sent in with a signature guarantee.
She fills out a stock power matching the name on the certificates exactly, and her bank guarantees her signature. She mails the certificates and the stock power in separate envelopes, tracked and insured. The transfer agent processes them and the sale can go ahead. She keeps copies of everything and notes the certificate numbers.
She also asks the agent in advance which forms it needs, since requirements can differ. Afterwards Elena asks whether any other certificates in the box could be deposited with her broker instead. Shares held in street name would avoid the paperwork next time, and she moves the remaining holdings that way. The signed copies she kept also let her answer the estate's questions about what was sold and when.
Watch out
Common mistakes.
- Signing the certificate itself, when a separate stock power is safer.
- Using a notary instead of a Medallion signature guarantee, when transfer agents usually refuse a notary.
- Letting the name differ from the certificate, when the signature must match in every way.
Questions
People also ask.
What is a stock power?
It is a legal document, separate from the certificate, that assigns ownership of shares. The SEC calls it a security power. It is used when paper certificates must be transferred.
Why is it kept separate from the certificate?
If you sign the certificate and lose it, someone else might use it. Sending signed powers in another envelope adds safety. The SEC also notes it helps when an owner cannot sign the certificate.
Do I need a signature guarantee?
Usually yes. Transfer agents ask for one to limit forgery losses. A bank, credit union or broker-dealer in a Medallion program can provide it.
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