STP and Cancelled Certificates


From an operations perspective, processing physical certificates is indeed cumbersome, however the number of certificates that are rejected, and the subsequent paperwork and associated delay, causes the greatest problem. The rejected securities consume an exponential amount of time and resources for all involved. Having an early warning system such as the SIC® database with all stop categories highlighting the potential rejects, will dramatically improve processing time for physical certificates. Having Transfer Agents report all stop categories to the SIC® database will greatly help the STP effort.

The SIC® team has been working with the Transfer Agent community to help facilitate the submission of all categories of stops to the SIC® database. It appears with Y2K out of the way and the advancement of technology, the problems of reporting other stops to the database has been greatly reduced. These and numerous other factors including risk reduction, and the SEC's proposed cancelled certificate processing rule, have led various Transfer Agents to report large numbers of cancelled certificates to the SIC® database.

Section 17(f)(1) of the Exchange Act and Rule 17f-1 (e) thereunder allows every reporting institution to report to the Commission or its designee with respect to any securities certificate not otherwise required by this section to be the subject of a report. This section allows Transfer Agents to report all categories of stops (Restricted, Cancelled, Escheated, etc.) to the SIC® database.

For years the SIC® database has been serving one purpose, to fulfill it's regulatory function with respect to Lost, Stolen and Counterfeit securities. An ancillary benefit to the entire industry has been cost and time savings by reducing the number of rejects by alerting Brokers to contact the Transfer Agent before delivering these 'problem' certificates. It is this second role that the industry has been pressuring SIC® to expand over the years in regards to Restricted, Escheated, Cancelled and other stop categories. Having all of these stop categories on the SIC® database would prevent the cumbersome reject process from monopolizing the DTCC's and Transfer Agent's time. It would also help to dramatically reduce risk and cost for the Broker/Dealers. If all stop categories are added to the database, the number of "Hits" we provide to the industry will increase and the time and cost involved in processing physical certificates, especially during a Corporate Action event, will be greatly reduced.

SIC®'s goal is to add as many stop categories to the database and have all of our clients linked electronically to our system. We ask all transfer agents to help us with this objective. The ultimate goal is to avoid all rejects and have every physical trade flow straight through the processing system without a problem. By maximizing the number of stops on the SIC® database, that ultimate goal can be reached.

Broker Dealer

Benefits to the broker dealer community

There are many benefits to the broker dealer community by adding all stops to the SIC® database. Although in the short term you will see an increase in your invoice as we add all stops to the database, you will be helping to create a long-term industry solution towards immobilization and STP as envisioned by SIFMA.

Lower operational costs: by reducing reject fees, mail costs, and unnecessary effort by your staff. All stop categories (cancelled, escheated, restricted, etc..) provides you with immediate cost savings. Identifying problem certificates on Trade Date provides better service to your clients and helps retain their business. This effort will greatly assist SIFMA and broker/dealers in their move towards immobilization.

Please see the document defining "Return to the System Prior to Entering a Sale", published by the Physical Securities Subcommittee, and the letter titled "SEC Letter Re: Physical" on the SIFMA website at:

Transfer Agent

All registered FINRA broker dealers, FDIC insured banks, and transfer agents handling physical certificates must be registered with the Securities Information Center as stated by SEC Regulation Rule 240.17f-1. If a firm does not handle any physical securities and has registered with SIC®, then you can file for an exemption with SIC® which will forego any billing invoices being sent out. If you would like to file for an exemption we need a letter on company letterhead with original signatures. In this letter we need stated that your firm does not handle physical securities and that you would like to file for an exemption. This letter must be into SIC® 60 days prior to the next billing cycle to avoid being billed.

New FDIC insured banks or FINRA members that do not handle physical certificates are exempt from SEC Regulation Rule 240.17f-1 and do not need to register with SIC®. If you need additional information pertaining to this please go to or