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Where Do Scriptophilists Obtain Certificates?

Scriptophily is the study and collection of stock and bond certificates.  These certificates may be of historical interest because they evidenced securities issued by well-known companies.  They also may be collected as works of art.  The artistic quality of many companies' certificates was enhanced by a New York Stock Exchange requirement of intaglio printing of certificates with a unique vignette and border.  Those requirements were, however, eliminated in 2001.  See SEC Release No. 34-48931 (July 26, 2001). 

There may be no mystery as to why collectors are attracted to certificates, but the real mystery is source of cancelled certificates.  Cancelled certificates are supposed to be destroyed for the very same reason that NYSE required fancy printing and images - prevention of forgeries and fraud.  In 2003, the Securities and Exchange Commission adopted a new rule, Rule 17Ad-19, requiring every transfer agent to establish and implement written procedures for the cancellation, storage, transportation, destruction, or other disposition of securities certificates.  The rule requires transfer agents to: mark each cancelled securities certificate with the word "cancelled"; maintain a secure storage area for cancelled certificates; maintain a retrievable database of all of its cancelled, destroyed, or otherwise disposed of certificates; and have specific procedures for the destruction of cancelled certificates.  In the adopting release, the SEC cited several notable thefts of cancelled certificates, including one case involving the theft of $111 billion of cancelled bond certificates.

Given the forgery risk, one might expect that very few certificates are available to collectors.  Yet, there are on-line vendors of these ephemera and they can be found in many antique stores.  In adopting Rule 17Ad-19 seemed to acknowledge that some certificates would finding their way into the hands of collectors: 

"In this regard, we note that cancelled certificates, after a period in transfer agent storage, are generally destroyed by the transfer agent or destroyed by some other party acting at the direction of the transfer agent or the issuer. However, a small amount of cancelled certificates may find their way from transfer agents to collectors or perhaps to other places currently unknown to us. Accordingly, to make the rule as complete as possible, we are inserting in paragraph (b) the words "or other disposition" into the phrase "destruction of securities certificates." The term "otherwise disposed of" requires that a record be maintained of how (as by sale or gift) and to whom (with name and address) the certificates were disposed of and the date of disposition."

Collectors may also acquire certificates that have not been cancelled.  These will largely be certificates issued by companies that have dissolved or otherwise ceased to exist.  They also may be certificates that were lost.  Finally, they may be certificates that were not exchanged in reorganization.

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