"Countersigned this day of 19... by Transfer Agent": Legal title to a share of stock lies in the reg istered owner; that is, in the person whose name appears on the books of the corpora tion as the owner. An assignee of the shares in possession of the certificate has it in his power to have the legal title transferred to him on the books of the corporation. If a corporation is of some magnitude, and its shares are frequently dealt in, it may main tain a formal transfer agency. Depending on the frequency of transfers, this may be an en tirely separate office, or a department in the corporation's own general offices, or a trust company which has undertaken to do the work. The president and the secretary may sign the certificates in blank, or may author ize the transfer agent to sign them with a stamp. The counter-signature of the transfer agent becomes a means of validating the certificate. The corporation may close its transfer books for a definite period over divi dend dates, or before shareholders meetings, in order to give itself time to make up the list of shareholders to whom it must mail divi dends, or to determine who is entitled to vote at the meetings.
"Registered this day of 19 .
Central Trust Company of New York by Secretary": A trust company ful filling the duties of registrar of stock simply acts as a check on the transfer agent in guard ing against mistake or fraud in the number of shares issued. The signature of the registrar gives an assurance that the number does not exceed the amount authorized. Of course the situation demands that the registrar be ab solutely separated from the transfer agent. The purpose of registering stock differs en tirely from that of registering bonds, but an swers to that of a trustee's " certification " of bonds. In respect to transfer of title, all stock by its very nature occupies the same position as registered bonds.
The wording of the power of attorney form appearing on the back of a stock certificate fully explains its purpose. In the ordinary course of sale through a broker, the owner of the stock would simply fill in the date line, sign, and get his signature witnessed. The seller does not know the purchaser, and can not fill in his name. If the seller should fill in the blank for the attorney, that particular person would either have to appear at the transfer agency or exercise the "power of substitution" to make out a new power of attorney.
Denomination: The ordinary denomination of bonds is $1000. For coupon bonds that is the maximum. Registered bonds may come in denominations of $5000 and multiples of $5000. Frequently bonds come in smaller denominations than $1000. A denomination of $500 is common. And there is some tend ency to issue denominations as small as $100 to meet the purchasing ability of people of small means. So far the demand has not
been great enough to make the issue of the smallest denominations common. When $500 and $100 denominations are issued at all, they form only part of the entire issue.
In the form presented the denomination is translated into its equivalent in sterling, marks, and francs. This, of course, makes the bonds more available for the English, German, and French markets. Sometimes part of the issue is put out with an even amount in the foreign currency — as £200. So long as the bond stays abroad, that is ad vantageous. If the investor should want to resell in the American market, that would be a greater disadvantage than it is an advant age in the foreign market. Since this is the natural primary market for an American se curity, such a resale is not an unlikely event. It is difficult to make the bonds of different currencies interchangeable for the very reason that would make it desirable to have them interchangeable, namely, because the denom inations in the various currencies do not come out even.
Interest rate: Though the rate of interest has been left blank in the form, as a matter of fact, these particular bonds have been issued as 5 per cents. The reason for leaving blank the place for naming the rate of interest the bonds are to bear is because the mortgage is still "open"; that is, more bonds can be is sued under it, and the directors desire to have authority to make the bonds to be issued in the future bear a different interest rate. Owing either to a change in market condi tions or to a change in the position of the corporation, either of which is very likely to happen, especially over a series of years, the bonds may sell on a different basis from the one they sell on now. Since bonds sell at a disadvantage at almost any premium, and also if at too great a discount, it is thought desirable to leave the interest rate blank in order that it may be changed to one at which the bonds will sell most advantageously. Presumably this will be a rate at which the bonds will sell at some discount from par. The rate will be changed only in case that will have a favorable effect greater than the somewhat unfavorable effect of breaking up the uniformity of the issue as a whole. The interest rate on some issues has been changed in this way. For example, of the Chicago Burlington & Quincy, Illinois division, bonds dated 1899 and due 1949, $49,650,000 are 3-1-s and $34,165,000 are 4s. Chicago, Milwaukee & St. Paul Railway general mortgage bonds, due 1989, are part in 4s and part in 31s. Chi cago & Northwestern general mortgage bonds, due 1987, are also part 31s and part 4s.