Book-Entry Shares Mandated By Year-End!
August, 2006 – The major U.S. stock exchanges received SEC approval this month to change public company listing requirements, so that all new issues of stock — say, a new preferred issue — will have to be Direct Registration System eligible (i.e., issued in book-entry versus certificates) after January 1, 2007. Moreover, all stock issues, including those already in the public’s hands, will have to be DRS eligible after January 1, 2008. Therefore, issuers who are not yet participants in the DRS system should check their by-laws for permissibility of book-entry issuance (amending them as necessary), and have their transfer agent help them take the necessary steps to “sign up” with the Depository Trust and Clearing Corporation. It is not a painful process at all, and applicable issuers will soon wonder “what took them so long” to enter the 21st century on this key corporate practice.