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What is the DRS?

The Direct Registration System (DRS) at a glance

The Direct Registration System (DRS) is a way for shareholders to hold their shares directly in their own name, rather than in street name (beneficial ownership), which involves a broker and a central depository. It makes you the legal title holder of the shares you have purchased. The shares are also removed from risky situations caused by the brokers' share lending - as they are now in your custody instead of the broker's or the central depository.


This self-custody model draws a direct line from the issuer (the company) to you as an investor - benefiting both immensely by removing layers of middlemen and the risks that come with beneficial share ownership.

Below is a pro's and con's list of the DRS versus beneficial ownership:

What are the commonly cited benefits of beneficial ownership for investors and companies?

  • Convenient access to trading (through websites and apps).

  • Low, or no transaction fees and account fees.

  • Protection against brokerage insolvency through SIPC Insurance [1].

  • Trade quickly without waiting for T+2 settlement for securities or for cash.

  • Semi-anonymity for larger individual investors (only their broker knows their identity).

  • Ability of investors to use their stock as collateral to borrow against in a margin loan [2].

  • Allows for the holding of uninvested cash [1].


What are the downsides to beneficial ownership for investors and companies?

  • Dilution of the float through stock lending and short selling.

  • Securities losing value due to float dilution from share lending and shorting.

  • Vote dilution makes gauging shareholder sentiment difficult for the issuer.

  • Issuers do not have access to shareholder information for beneficially owned shares.

  • Shareholder proposals require signoff by legal record holders (not beneficial owners).

  • 401ks and pensions are used for securities lending and collateral.

  • Securities can be moved to position close if clearing agents and brokers choose to do so.

How does DRS benefit the investor?

  • No possibility of failures to deliver, allowing for true price discovery.

  • Shares held within the Direct Registration System cannot be lent out.

  • Directly cast votes to the issuer with no interference. One share always equals one vote.

  • Direct line of communication with the company.

  • Submit shareholder proposals alone (if ownership duration and share quantity requirements are met).

  • Transfer agent or broker insolvency does not impact ownership positions.

  • Dividends, stock splits, and interest payments are processed directly with no delay [3].

  • Shareholders receive annual and other reports, dividends, proxies, and other communications directly from the company [3].

  • Securities can be still purchased even when the same securities have been moved to position close only (PCO) by other brokers or cleaning agents. There is an exception when a “chill” or “freeze” is placed on a security. [4]

  • Shareholders receive all the benefits of paper certificates without the cost or risk [5].


How does DRS benefit the company?

  • No possibility of failures to deliver, allowing for true price discovery.

  • True price discovery ensures a cost of capital that reflects corporate financial status, rather than an NBBO that does not reflect supply/demand for shares.

  • Reduces the cost of corporate actions [5].

  • Transparency shared from the transfer agent prevents over-voting, allowing for proper corporate governance.

  • Direct communication with long-term investors.

  • More long-term shareholders helps to reduce negative price volatility.

  • Protection against abusive short selling and over-lending.

  • Ability to see shareholder names, positions, and contact information (demographic information), allowing for a more direct and mutually supportive relationship between issuers and investors.

  • Simplifies and streamlines share ownership and investor relations.

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