How Do I Sell a Stock Certificate to a Friend?

Stock trading involves brokerage accounts, which allow you to place orders for a commission. Trading used to be a telephone activity, but most brokerages have moved online, and individual investors can now trade with their computers. The brokerage keeps track of your stock portfolio with database software. Electronic records are backed up by paper account statements.

Although paper stock certificates that you have to keep safe are becoming a thing of the past, some certificates have survived. Many are kept in safety deposit boxes or secured at businesses or homes. A stock certificate carries the name of the owner and the number of shares it represents. It also has a nine-character CUSIP number that is unique to the issuer and the class of security. A stock certificate is the legal property of the owner whose name is on it. It cannot be sold or transferred by anyone else.

The owner of the certificate has the authority to transfer it to another party, called the "assignee." He does this by endorsing the back of the certificate, naming the assignee, dating the transfer, and signing it. The signature must match the name on the front. The sale price and terms are between the seller and buyer, and are not recorded on the certificate itself. The assignee can then have the certificate re-issued in his own name, or he can send it along to a brokerage, which will record the ownership and keep the paper in a bank vault.

If you are sending a stock certificate to a new owner, it's important to keep it as safe as possible in transit. This means using certified mail and insurance, if you use the U.S. Postal Service, as well as delivery confirmation. If the certificate is lost, you must contact the transfer agent and order a "stop transfer." This prevents someone else from forging your signature and taking possession. Always keep a separate record of the certificate number as well as a photocopy of the front and back, so you can prove ownership if you need to.