Stock Power

Stock Power

Stock power is a legal power of attorney form that transfers the ownership of certain shares of a stock to a new owner. A stock power form includes the previous owner's name, a description of the shares to be transferred, the stock certificates, and the cost basis of the shares. A stock power form includes the previous owner's name, a description of the shares to be transferred, the stock certificates, and the cost basis of the shares. Stock power is a legal power of attorney form that transfers the ownership of certain shares of a stock to a new owner. If the owner of a stock is unable to complete a needed stock power form, the legal representative of that person must sign the form.

Stock power is a power of attorney form that transfers share ownership to a new owner.

What Is Stock Power?

Stock power is a legal power of attorney form that transfers the ownership of certain shares of a stock to a new owner. A stock power transfer form usually is only required when an owner opts to take physical possession of securities certificates, rather than holding securities with a broker. A stock power form includes the previous owner's name, a description of the shares to be transferred, the stock certificates, and the cost basis of the shares. 

Stock power is a power of attorney form that transfers share ownership to a new owner.
Stock power is sometimes referred to as a security power form and generally requires a signature guarantee to protect against fraudulent transfers.
This form is usually only needed when physical possession of security certificates is taken.
A stock power form includes the previous owner's name, a description of the shares to be transferred, the stock certificates, and the cost basis of the shares.

How Stock Power Works

A stock power usually requires a signature guarantee to protect against fraudulent transfers. A stock power form is sometimes referred to as a security power form. As mentioned, it’s generally only needed for the transfer of physically held shares, but it may also be needed to change the name on the account or add a transfer of death beneficiary. 

Stock powers can be used in secured lending transactions, where securities are used as collateral for a loan. When this happens, the stock power is signed by the borrower and delivered to the lender, but is not dated or completed. A stock power, in this instance, protects the lender’s interest, allowing them to foreclose on the shares if the loan is not repaid. 

Special Considerations

Most often, when buying or selling shares of stock, a retail investor uses a brokerage firm that will take care of any legal documentation required for the transfer of shares to the new owner. Thus, in the vast majority of cases, the owner of the shares of a stock does not take possession of the share certificates and does not have to complete legal paperwork to buy and sell shares. 

The shares are held in an electronic record with the broker's custodian eliminating the need for physical possession of the shares. However, before technology allowed records to be kept entirely electronically, physical stock certificates were the norm, and it was ubiquitous to use stock powers when transferring ownership of shares from one party to another.

Requirements for a Stock Power 

Stock powers are needed for each account and each security being transferred. All owners must sign the form and generally have their signatures guaranteed with a medallion signature guarantee. In some cases, if a stock power is too old, it might be rejected. 

If the owner of a stock is unable to complete a needed stock power form, the legal representative of that person must sign the form. This can include the Power of Attorney or custodian for someone that is incapacitated or a minor.

Related terms:

Bearer Form

A bearer form is a security not registered in the issuing corporation's books, but which is payable to its bearer, that is, the person possessing it. read more

Bond Power

Bond power is a legal form authorizing the transfer of ownership of a registered bond from one person, or entity, to another. read more

Cost Basis

Cost basis is the original value of an asset for tax purposes, adjusted for stock splits, dividends and return of capital distributions.  read more

Custody-Only Trading and Example

Custody-only trading is a system in which shares must be registered to the holder by name and can only be traded in physical form. read more

Deed

A deed is a signed legal document that transfers the title of an asset to a new holder, granting them the privilege of ownership. read more

Grant Deed

A grant deed is a legal document used to transfer ownership of real property. read more

Medallion Signature Guarantee

A medallion signature guarantee is a special certification stamp that guarantees a signature that authorizes an authentic transfer of securities. read more

Power of Attorney (POA)

Power of attorney (POA) is legal authorization for a designated person to make decisions about another person's property, finances, or medical care. read more

Retail Investor

A retail investor is a nonprofessional investor who buys and sells securities, mutual funds or ETFs through a brokerage firm or savings account. Retail investors can be contrasted with institutional investors. read more

Share Certificate

A share certificate is a written document verifying a stockholder owns shares of a company; this paper stock certificate has largely been phased out in the digital age. read more