What Is a Direct Registration System?


Quick Answer

A direct registration system, or DRS, allows electronic direct registration of securities in an investor's name put on the books for the issuer, allowing for the electronic transfer of shares, according to Nasdaq. Since DRS shares are electronic, they cannot be lost or stolen, which reduces the cost and effort of replacing a lost certificate, notes Continental Stock Transfer & Trust.

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Full Answer

When a company offers direct registration of its securities, the security registered in the shareholder's name does not need a physical certificate as proof of ownership. Aside from not receiving a certificate, a statement of ownership, dividends, annual reports and other communicative information are still received from the issuer, explains the U.S. Securities and Exchange Commission, or SEC.

There are three options for holding securities, including a physical certificate, street name registration or direct registration. The advantages of using direct registration include faster selling of securities without the process of filling out long forms, states the U.S. Securities and Exchange Commission. Protection against counterparty risks, direct correspondence from the company itself and ease of gift transfers are also advantages, according to Joshua Kennon for About.com. A disadvantage of using direct registration is the stockholder cannot sell his securities immediately.

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