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Uncertificated shares are mutual fund shares that are recorded as being the property of the shareholder. However, no hard copy stock certificates are issued. In lieu of a stock certificate, the proof of ownership for the uncertificated shares is maintained in the records of transfer agent that handled the purchase transaction.
An uncertificated share carries the same legal rights and privileges as any shares of stock that are documented with a formal certificate. The owner of uncertificated shares can trade the shares at will, as well as purchase additional shares of the same stock. Proof of ownership of the shares can always be obtained by requesting documentation from the transfer agent. In addition, the brokerage house that 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 issue of uncertificated shares covers many different types of investments. Also known in some circles as book shares, the shares of stock can represent just about every classification of share available on the market today, including shares that are issued as part of retirement plans or employee stock ownership plans. The book share has long been a common tool within the investment market, and derives the name from the fact that the records of the broker or agent establish the valid ownership of the shares.
Whether an investment is represented by a certificate or by a line item in financial records, the book share will trade with the same level of ease. Investors who wish to purchase uncertificated shares may do so with no additional efforts required. In fact, many investors prefer the acquisition of uncertificated shares for the simple reason that there is less paperwork to maintain. Brokers and other financial advisors can help new investors find potentially profitable investments that are represented by uncertificated shares of stock, as well as explain the benefits to this approach.