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valueguy88 said:
just a little correction here...

there is
1)"street name"
2)your name
3)holding certificates

2 and 3 are not the same.

2 is usually achieved simply by having a cash account (and even then i think sometimes you have to specify to the broker that you want it on your name)

3 means that you require physical delivery of certificates and you have to pay a fee for that and thats a whole other thing. It's even safer.



To quibble with your correction (and test my understanding):

We agree on #3 (holding physical certificates). When you do this, the broker is out of the loop -- the company's records show you as the "record holder". You have physical (paper) stock certificates, which you can keep in a safety deposit box, or under your mattress, or display framed on the wall.

In #2 above, perhaps you're referring to the Direct Registration System (DRS, available only for some companies -- is OSTK among them?) offerred by the Depository Trust and Clearing Corp. (see http://www.dtcc.com/ProductsAndServices/asset/drs.htm). It is indeed another way of holding (some) securities in your name instead of in street name (your broker's name).

I believe that holding securities in a cash (that is, non-marginable) account is required, but not sufficient, for having you be the record holder (your parenthetical remark seems to agree with this). You may need to request Direct Registration, or, if it's not available on the security in question, you may need to request the paper certificates.

However, the distinction that Buffett made was between a cash account and a margin account. So long as the securities are held in a cash account it seemed that Buffett considered them safe (immune to cascading broker defaults) -- even if they are still held in street name.

So perhaps you can retain the convenience of holding and trading securities normally through your broker (holding them in street name), and still have peace-of-mind against fiduciary meltdown, by merely ensuring that your accounts are margin-disabled. Further, if persistent FTD (naked shorting) contributes to potential cascading broker problems, I expect that marginable securities would be much more vulnerable than those held in a cash account.

Anyway, I found it interesting to learn about the existence of the DRS. I think that requesting DRS in #2 would be required to become a record holder, and I'm not sure how likely it is to be available on securities that I hold. So I take comfort in my interpretation of Buffett here . . .
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