"Accepting" Inscribed Stocks

Where a purchased security belongs to the class of inscribed1 stocks, - in other words, where the perfecting of the title resides in the inscription of the buyer's name in the books of the bank or agent by whom the loan is managed, - an interesting question arises. Should the purchaser "accept" (as it is called) the transfer to him by actually writing his name in the Register? The object of this course is his protection against fraud by thus furnishing the bank or agent with an authentic specimen of his signature, which they will compare with the signature on future dividend warrants, and with that on any transfer subsequently submitted for registration. For the stock receipt which the buyer obtains possesses no negociable value, and need not, necessarily, therefore, accompany a transfer as part of the evidence of title: hence it is evidently practicable for a forger who can ascertain the particulars of any person's holding to attempt a fraudulent transfer to himself. The course formerly pursued, to avoid this contingency, consisted in the attendance of the buyer at the bank where the stock was inscribed with the broker (through whom the purchase was effected) for his identification, and the buyer then signing his name in the register as accepting the transfer, and thus providing the bank with an example of his signature for its use. This plan proved very inconvenient, and comparatively few people adopted it; a more reasonable practice has recently been introduced with the same end of protection in view. Taking a stock inscribed at the Bank of England: the buyer may attend alone, without a broker, in the chief accountant's department; sign a simple form requesting a confirmation of his name being upon the books as the owner of the stock in question; pay a fee of one shilling; and leave the stock receipt. In a day or two the bank will return it, with a printed memorandum recorded upon its face, signed by the chief accountant, to the effect that the amount of stock to which the receipt refers was inscribed in the books of the bank in the name of the buyer on such and such a date. Or, if attendance should be inconvenient, the buyer need simply write to the chief accountant, desiring a letter of confirmation; sending the stock receipt, with a Postal Order for one shilling; and the preceding result will take place. The present practice of the other banks (acting as agents for loans) is similar.

1 Inscribed stocks: Latin in, upon, and scribcre, to write. The owner's name is entered as the legal holder in the Books of the Institution managing the issue. Such stocks cannot be transferred from seller to buyer by simple delivery of documents, since there are no documents to deliver. A change of ownership must be effected by a fresh inscription in the Books, and hence inscription constitutes the title.

Registered stocks: Low Latin registrum, a book in which events are recorded: from re, back, and gerere, to bring. A registered security is only transferable by a separate deed, and no holder possesses a legal title until his name as transferee has been recorded in the company's books. The distinction between the two terms is artificial in respect of reality of ownership.

Moreover, if a person has not accepted transfers of former purchases of inscribed stocks, he can, by applying for a form to the chief accountant, completing it (and returning it) with particulars of his different securities, obtain a verification of the fact that the several stocks stand inscribed in his name. The fee (if more than one stock is comprised) is sixpence per account, with a minimum amount of one shilling. It is quite worth while adopting, for safety, this ready and economic course.

Foreign Government Bonds

5. The Bonds of many foreign governments may be accepted with confidence. But it is important first of all to ascertain the laws of the particular country upon the subject of internal taxation, or the investor may find his return from the investment seriously reduced by double contribution to local fiscal charges and his home income tax.

Bonds Redeemable By Drawings Not Desirable For Ordinary Investor

It is hardly desirable for the ordinary investor to purchase Bonds which are redeemable by annual or periodical drawings. Certain Bonds under such an arrangement are drawn by lot every year during the currency of the issue, and redeemed: intimation of the drawings which have thus been effected is furnished in the leading newspapers, or can be ascertained by application at the office of the English agent; and if a particular Bond be drawn shortly subsequent to purchase (which it possibly may be, and the chance obviously increases with each year), the renewed trouble and expense of re-investment elsewhere are incurred. Moreover, the recurrent search and inquiry to discover whether a Bond has been drawn or not are so burdensome that I personally, after experience of the kind, invariably avoid this class of investment. It should also be seen that both principal and interest are payable in gold or sterling at a fixed rate of exchange, and both payable in London. In the Bonds to Bearer we have to bear in mind the possibility of loss and robbery, and the owner's position in either of these events I fail to ascertain. My advice accordingly would be to avoid, as far as possible, investments in this latter form.

In regard to foreign government securities as channels of investment - and the principle applies indeed to every borrower, individual or corporate or national - the element of character is essentially involved, and the practice adopted with respect to private persons should be applied. If, on any occasion, delay in payment, above all, default, is recorded in the history of the borrower, let the investor close his eyes to the most tempting offers. Or if, like a thriftless individual, the country's expenditure tends to exceed its income, or the borrower's career has not proved a consistent record of probity and punctuality in the fulfilment of obligations, or if former borrowed funds have been largely wasted in profitless schemes, or in the discharge of debts incurred without any provision being set aside for their honourable satisfaction; in any of these contingencies the refusal of confidence which we display towards a person in similar circumstances should be extended here. On the whole - although there are many foreign governments of the highest honour and reputation whose obligations are deserving of fullest trust - the ordinary investor, perhaps, unless he can command skilful guidance, would better exclude this description of investment from his list. With the possession, however, of a competent adviser, for he himself will probably only have a vague and general knowledge upon the subject, indefinite for purposes of discrimination, he may safely entertain some investments of this selected nature.