Why Direct Register your shares?
Here are some examples and precedent displaying how direct registered ownership protects you.
In normal times, the traditional investment system works well to meet the expectations of everyday retail investors. Positions are purchased with settled cash or margin, and the investor is responsible for and able to claim associated profits and losses with those positions - in addition to other rights of ownership, such as dividends.
​
Let's take a look at some examples of when holding through the central custodial system rather than in their own name resulted in worse outcomes for retail investors, or when powerful market incumbents thumbed the scale for preferential treatment.
Case Study: DOLE
That's right - as the knot was untied and the dust settled, investors who maintained direct ownership and had a baseline claim to the funds were able to be paid out in full, while investors holding in beneficial ownership had to split funds with others. Read the details of the court findings and settlement with the button below.
Case Study: Piggly Wiggly
Piggly Wiggly, founded by Clarence Saunders in 1919, was notable for being the first self-service grocery store where customers picked their own items rather than having clerks gather them. The company went public and was listed on the NYSE in 1922 - and in 1923, was subject to a massive short squeeze.
​
Although the model was innovative and successful, Wall Street bears began aggressively short selling against Piggly Wiggly. Saunders became aware of financial interest against him around December, and from January to March of 1923, secured $10 million in loans from various bankers. In March, he aggressively bought more Piggly Wiggly stock. Prices rose from $40 to $124.
​
On March 20th 1923, NYSE responded by suspending trading in Piggly Wiggly and extending the delivery deadline for short sellers. This was before the SEC existed! Saunders was unable to maintain his position as long as short sellers were, and ended up losing everything.
​
Direct Registration of shares wouldn't have helped Saunders hold on to his margin position, but it may have helped make the initial short sale positions harder for established wall street financiers to move into.
Case Study: Global Links
Global Links was a NV real estate company, and on Feb 1st 2005, implemented a 1-for-350 reverse split. Shares outstanding reduced from approximately 350,000,000 to 1,100,000. Despite this, in the first 4 days after the reverse split, over 143,000,000 shares were traded on market despite DTCC having claim to just 929,277 shares.
​
CEO Frank Dobrucki publicly stated he believed fraud was possible in a letter to investors from March 15th, 2005, stating "It became very clear that we had no control of the volume or price of our stock in anyway," and . The stock dropped from 10 cents to .08 cents after the split, and investors who purchased through their broker were not able to confirm delivery. Robert Simpson, a Michegan businessman, personally purchased >100% of outstanding shares through his broker - but never received delivery.
In total, there were 27.3 million failed trades on Feb 4th alone and over 50 million failed trades across the week. Investors were not meaningfully made whole as the value of their investment cratered under the pressure of a swelling supply and delivery failure.
All of these events happened just a few months after Regulation SHO went into effect in January 2005, a landmark effort which imposed strict close-out requirements on stocks that met high thresholds of failures to deliver. 4 firms were fined a total of $1.25 million for inadequate RegSHO compliance.