How Do I Sell a Stock Certificate to a Friend?

by W D Adkins
Your mutual fund adviser can help you complete your letter of instruction.

Your mutual fund adviser can help you complete your letter of instruction.

Most shares of stock are held by the issuing company’s transfer agent or a broker on behalf of an investor. When you want to sell these shares, you must do so through the transfer agent or a broker. One advantage of holding the physical stock certificates is that you can sell them to another person such as a friend without using an intermediary. As with other property of significant value, however, such as cars and real estate, you must follow a specific procedure to transfer ownership of the stock certificates.

Contact the Transfer Agent

Under Securities and Exchange Commission rules, all stock ownership changes must be registered with the transfer agent for the issuing company. A transfer agent is a separate firm that handles stock transactions on behalf of the issuing company. Transfer agents are very strict about adhering to established rules. All transfer agents use similar procedures, but the details can trip you up. Contact the transfer agent for the company that issued the stock certificates and ask for a copy of their guidelines and ownership transfer form. The transfer agent’s contact information is available from the company’s investor relations department or online from the company’s website.

Medallion Signature Guarantee

Obtain a Medallion Signature Guarantee. The Medallion Stamp Program certifies that you are the registered owner of the shares represented by your stock certificates. You might be able to sell a few shares of stock to a friend without this certification, but transfer agents will not accept a change of ownership for a large amount without it. For example, Bank of New York Mellon won’t transfer ownership of 250 shares or more without the Medallion Signature Guarantee. You can get the Medallion Signature Guarantee at participating institutions, which include banks, credit unions, brokerages and savings and loan associations. Do not rely on having your signature notarized, as transfer agents do not consider this acceptable.

Transfer Ownership

Take the stock certificates to a Medallion Stamp Program institution so an authorized person can witness the change of ownership of the certificates. Bring along any required documentation that verifies your identity. Fill out a transfer of ownership form. You’ll need to provide information about yourself such as your name, address and Social Security number, plus similar information for the friend who is buying the shares. Sign the transfer of ownership form with your name exactly as it appears on the stock certificates.

Complete the Transaction

Mail the stock certificates, transfer of ownership form and any other required documents to the address provided by the transfer agent. The documents should be sent by registered mail. Finally, provide your friend with a notarized receipt that indicates the amount of money paid for the shares and the date purchased. A receipt isn’t required for the transfer of ownership, but your friend will need this for her tax records.

About the Author

Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.

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