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If someone steals a $5 banknote from me, that $5 is effectively gone if I have no information about the thief. For all practical purposes, the $5 is no longer mine; it is the thief's. The thief can use the $5 to buy goods. Suppose someone steals share certificates from me, and I have no information about the thief. For all practical purposes, do the shares still belong to me?

If the shares still belong me (unlike the banknote), what is the financial/legal terminology for describing this difference in how banknotes and share certificates are treated when stolen?

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    Possession vs. ownership. – Polygnome Jun 23 '20 at 8:25
  • Shares are traceable and have registered owners so it's still yours in the same way that a stolen car is still yours; you just cannot sell it until you gain back physical possession. See investopedia.com/ask/answers/07/lost_share_certificate.asp about what to do if you lose possession of a share certificate. This specific scenario isn't really a modern issue unless you've inherited some stocks or something. – MonkeyZeus Jun 23 '20 at 14:02
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Stealing never transfers legal ownership. I assume what you are actually asking is whether a thief could successfully cash out stolen stock certificates. To that, the answer is not easily.

All changes in ownership of stock shares have to be registered with the transfer agent for the stock. When you present physical share certificates to a broker for sale, the broker will verify the validity of the certificate with the transfer agent. If the certificates have been reported stolen, all transfers would be blocked. Certificates do have a form for transferring ownership printed on the back, so if they hadn't been reported stolen yet, you could fill out that form and claim that you had bought or been given the certificate by the registered owner. However, you'd have to forge the signatures, and find a corrupt notary, willing to perjure themselves, to attest to the validity of the signatures.

Most other publicly traded financial instruments have similar protections. An exception would be bearer bonds. Bearer bonds are bonds for which ownership of the bond is not tracked, allowing the owner to remain anonymous. Stolen bearer bonds still wouldn't legally belong to the thief, but it would be much easier to get away with passing them off.

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  • I think the most important question with stolen property is what happens to ownership once someone else acquires it from the thief, assuming that someone else wasn't aware it was stolen (or reckless). For most cases with physical property, the original owner can recover it at any time after the theft. For money, once the thief has passed it to someone else, it's gone. I don't know what would happen with share certificates if the thief did successfully transfer them. – GS - Apologise to Monica Jun 22 '20 at 17:56
  • @GS-ApologisetoMonica I suspect that if a broker didn't follow standard procedures in verifying ownership of the stock, they would be liable for the damages and probably a bunch of SEC violations. If the broker acted in good faith, but say the notary falsely attested that they had witnessed the transfer, the broker would be off the hook, but the notary would be liable and probably face perjury charges. – Charles E. Grant Jun 22 '20 at 18:13
  • @GS-ApologisetoMonica back in the day when paper certificates were the rule, and paper mail the primary line of communication this was a frequent topic of litigation. – Charles E. Grant Jun 22 '20 at 18:15
  • Personally I'd be most interested in where this leaves (a) the original owner and (b) the innocent recipient. One or both might have claims against the thief or the broker etc, but who actually keeps the stock by default? But I don't know what the OP was specifically interested in. – GS - Apologise to Monica Jun 22 '20 at 18:22
  • Are bearer bonds still a thing? Specially when the amounts start to rise above +$10,000, I wonder how they won't collide with anti-money laundry/tax evasion legislation. – Quora Feans Jun 23 '20 at 7:08
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The shares themselves still belong to you, but you no longer have proof of ownership, which you would need to sell them on. It's no different from the title documents (US) / V5 (UK) for a car.

There is lots of relevant information here including what to do if you have had share certificates lost or stolen:

Each company’s procedures may vary. However, there are some steps that the shareholder must follow. First, the shareholder must describe the loss and any facts surrounding the loss in an affidavit. Second, the shareholder may be required to purchase an indemnity bond. The purpose of the bond is to protect the corporation and the agent in case the lost certificate is somehow redeemed by another party at a later date. (Think of it simply as additional insurance). Note: The cost of this bond is typically 1% to 3% of the value of the shares. When the necessary information has been provided and the necessary steps are taken, a new certificate will be issued.

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    It is somewhat different from the UK V5 (now V5C), which has "THIS DOCUMENT IS NOT PROOF OF OWNERSHIP" printed right at the top of the front cover. – MadHatter Jun 23 '20 at 11:00
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    @MadHatter If it isn't proof of ownership, what is? – Hashim Aziz Jun 23 '20 at 21:53
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    @Prometheus The DVLA's website says verifying proof-of-ownership can be done by contacting them directly: gov.uk/request-information-from-dvla – Dai Jun 24 '20 at 3:07
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    @Prometheus the V5C records the registered keeper, typically the person who actually uses the car. The owner of the car could be a different person (e.g. parents own a car which only their 17 year old child uses) – stuart10 Jun 24 '20 at 14:33
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    @Prometheus HMG generally doesn't get involved in registering the ownership of private property (an exception being the Land Registry). If the question arises, you prove ownership of a motor vehicle the way you'd prove ownership of any similar thing: a paper trail of signed receipts, bank statements showing the transfer of funds, the dealership's original records in the case of new cars, and the like. – MadHatter Jul 4 '20 at 13:57

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