ANSWERS: 1
  • If you hold a paper stock certificate, you can sell it to a friend without the use of a broker. This process is perfectly legal, as long as you follow the appropriate steps and certifications necessary. By avoiding the use of a broker, you can save a few dollars in fees and make more money on the transaction.

    Getting Started

    You may directly sell publicly traded stock as long as it is registered with the Securities and Exchange Commission (SEC). There are just a few cases when it is not legal to sell your stock, e.g., because it is not in a registered company or because there are restrictions placed on it, such as a vesting limitation. Sometimes the company issuing the stock requires it to reach a certain age or earnings threshold before it can be sold. This is common for stocks acquired through your employment, or in situations where the sale of the stock could negatively effect the company. You can check the status of your stock by looking through the SEC database or by calling the company to be sure your stock is unrestricted. Before continuing in the process, collect payment for the stock from your friend. Research what the current value of the certificate is, and use that as your basis for value. To protect both of you, it is best to hold the check to be sure that you have payment up front, but wait to cash it until your friend has received his official new certificate in the mail.

    Stock Power

    A stock certificate that has a printed statement of "stock power" on the back can generally be traded. You must fill out this form with complete information about you and the friend to whom it will be transferred. You then need to sign the bottom of the form and have your signature guaranteed by your bank, a process similar to notarizing. Signing the stock power statement gives power of attorney to someone else in order for her to complete the transaction on your behalf.

    Completing the Transaction

    You must take it upon yourself to find out who the "transfer agent" is for the company that you hold stock in. This is the person who will be granted the power of attorney to complete the transaction between you and your friend. Check with the agent about requirements for completing the transaction, such as sending the certificate registered mail. Send your stock certificate to the transfer agent. Federal trade laws require him to turn around most transfers within three business days. The new stock will be sent directly to your friend. Confirm that the stock was received and cash your check.

    Source:

    Investment FAQ: Buy and Sell Stock Without a Broker

    Investopedia: Restricted Stock

    More Information:

    SEC Company Search

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