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In Singapore, my shares are held by an organization known as the Central Depository (CDP). Regardless of which stock brokerage firm I am using, I can see the same shares, as all of the shares I own are held in the central depository. For example, if I have 5 brokerage accounts at brokers A, B, C, D, E, I will be able to buy shares through one account, and sell through the others, because all brokerage accounts can see the same shares. I can also transfer shares to another person by instructing the central depository to take shares from my account and deposit them into the other person's account.

In Malaysia, a similar system exists: the Central Depository System (CDS).

What is the name of the organization that acts as the central depository for shares in the US? If there is no such organization, where are shares held? How can I know if I really own the shares that the broker says I own, and that the broker is not cheating (brokers could just record fictitious trades and fictitious numbers of shares)?

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The nearest equivalent in the US to the Singapore and Malaysia Central Depositories is the Depository Trust & Clearing Corporation, a holding company which owns the DTC and NSCC which provide central clearing of US equities.

It works differently to the Singapore/Malaysia system, in that retail customers do not have a direct relationship with DTCC. No statements are sent by DTCC or NSCC to individual retail investors, and those investors are usually not even aware of what DTCC does (which may explain why other respondents seem to be unaware of it, despite it being the largest securities clearing house in the world).

So who does have a direct relationship with DTCC or NSCC? Clearing firms. These include brokers (often associated with banks, as is the situation in Singapore), and so-called "self clearing" trading firms. These entities are subject to direct regulation by the US Securities and Exchange Commission (SEC), unlike individual investors who will never communicate with the SEC unless something goes very wrong. Retail investors' securities are held in accounts registered to these clearing firms, not the individual. DTCC does not know or care which individual has which shares on which day, it only cares about the aggregate positions of the clearing firms, and the daily net flows (settlement) between them.

How can I know if I really own the shares that the broker says I own, and that the broker is not cheating (brokers could just record fictitious trades and fictitious numbers of shares)?

Most US retail investors use quite large and trusted brokers, but there have been cases of fraud such as the Madoff scandal. The SIPC insures cash deposits up to 250k USD and stocks, bonds, and certificates of deposit up to 500k USD per client at each brokerage firm. Some US investors therefore split their holdings among multiple brokers to stay within or near the 500k USD limit on this automatically-provided insurance.

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What is the name of the organization that acts as the central depository for shares in the US?

There is no such central organization in the US.

If there is no such organization, where are shares held?

Your broker holds the record of the shares (though like cash, most of it it just stored electronically, not in physical certificates)

How can I know if I really own the shares that the broker says I own, and that the broker is not cheating (brokers could just record fictitious trades and fictitious numbers of shares)?

You could check with the issuer of the stocks you buy and make sure you are a registered owner - their "investor relations" group should be able to tell you this. (Note that if you own units of a Mutual Fund or ETF, you do not own the stocks within it, so the company has no knowledge in that case).

Also, if the broker is a member of the Securities Investor Protection Corporation ("SIPC") (you shouldn't use them if they're not), then you are protected from fraud for up to $500,000, including protection for cash up to $250,000.

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  • Relevant: "Street Name" Registration by broker, and "Direct" Registration by the issuer or transfer agent sec.gov/reportspubs/investor-publications/… – base64 May 22 at 14:23
  • SIPC cash component is $250,000 since 2010 sipc.org/about-sipc/history – base64 May 22 at 14:24
  • If my shares are held in street name, can I still ask the company's investor relations department to check if I am registered as a shareholder? If not, how can I be sure that the broker is not cheating? – Flux May 22 at 14:30
  • @base64 Thanks, fixed - I had an old link from the SEC... – D Stanley May 22 at 14:41
  • @Flux you may not be able to, which is why you want to choose an SIPC member, so you have some insurance against fraud. – D Stanley May 22 at 14:43
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Most stocks that trade on the stock market are accounted at a commercial transfer agent. The transfer agent can account stock ownership to a stock broker or to an individual investor.

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  • Is there anything that protects investors against fraudulent commercial transfer agents? – Flux May 22 at 23:43
  • The transfer agent can't be fraudulent in the accounting of stock because the company is watching it and the company can't be fraudulent in the issue of stock because the transfer agent is watching it. Transfer agents in the U.S. are registered with either the SEC or with a bank regulatory agency. – S Spring May 23 at 2:08

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