Safekeeping Certificate

A safekeeping certificate is a document that represents ownership of a security. Safekeeping certificates are the investor's claim against the institution that is holding his or her financial instruments. Investors normally entrust safekeeping of the ownership certificates to their brokerage firms where they conduct trading transactions.

When an investor purchases securities — let's say shares of a company — he or she will normally register ownership in street name. Under street name registration, the investor's brokerage firm will show the investor as the beneficial owner and maintain in its possession a safekeeping certificate (in book entry form) on behalf of the investor. The main advantage of safekeeping of the certificates with the broker-dealer is that there will be virtually no risk of them being lost or stolen. An investor may derive pleasure and satisfaction of having a physical certificate in hand, and could decide to keep it in a bank safe deposit box, but the convenience and surety of safekeeping at the broker-dealer make "in street name" the conventional method of possession.

Banks offer custodian services for institutions. Safekeeping certificates are held by large financial concerns such as State Street Bank, Northern Trust and Bank of New York Mellon for their clients, who also require an array of other custodian services for their securities. Regulators govern policies and procedures for custodians who handle safekeeping certificates for institutions to help protect the integrity of the market trading system. The proper managing of certificates showing ownership of traded securities is essential for the smooth functioning of global securities markets.