Home » Trading » How to Buy and Sell Stock Without a Broker
Yes, you can buy/sell stock from/to a friend, relative or acquaintance without going through a broker. Call the company, talk to their investor relations person, and ask who the Transfer Agent for the stock is. The Transfer Agent is the person who accomplishes the transfer, i.e., by issuing new certificates with the buyer’s name on them. The transfer agent is paid by the company to issue new certificates, and to keep track of who owns the company’s stock. The name of the Transfer Agent is probably printed on your stock certificates, but it might have changed, so it is best to call and check.
The back of the certificate contains a stock power, i.e., those words that say you want the shares to be transferred. Fill out the transferee portion with the desired name, address, and tax id number to be registered. Sign the stock power exactly as the certificate is registered: joint tenancy will require signatures from all the people listed, stock that was issued in maiden name must be signed as such, etc. In addition to signing, you must get your signature(s) guaranteed. The signature guarantee is an obscure ritual. It is similar to a notary public, but different. The people who can provide a signature guarantee are banks and stock brokers who are members of an exchange. Now, your stock broker might not be too happy to see you and help you when you are trying to avoid paying a commission, so I suggest you get the guarantee from your bank. It’s very easy. Someone at the bank checks your signature card to see if your signature looks right and then applies a little rubber stamp. Also, if you have the time, have the transferee fill out a W-9 form to avoid any TEFRA withholding. W-9 forms are available from any bank or broker.
Then send it all to the transfer agent. The agent will usually recommend sending securities registered mail and insuring for 2% of the total value. For safety, many people send the endorsem*nt in a separate envelope from the stock certificate, rather than using the back of the stock certificate (if you do this, include a note that says so.) SEC regulations require transfer agents to comply with a 3 business day turn-around time for 90% of the stock transfers received in good standing. In a few days, the buyer gets a stock certificate in the mail. Poof!
There is no law requiring you to use a broker to buy or sell stock, except in certain very special circ*mstances, such as restricted stock, or unregistered stock. As long as the stock being sold has been registered with the SEC (and all stock sold on the exchanges, NASDAQ, etc. has been registered by the company), then the public can buy and sell it at will. If you go out and create yourself a corporation (Brooklyn Bridge Inc), do not register your stock with the SEC, and then start selling stock in your company to a bunch of individuals, advertising it, etc, then you can easily violate many SEC regulations designed to protect the unsuspecting public. But this is very different than selling the ordinary registered stuff. If you own stock in a company that was issued prior to the time the company went public, depending on a variety of conditions in the SEC regulations, that stock may be restricted, and restricted stock requires some special procedures when it is sold.
In brief: I do not believe that the guy who offers on the net to sell people 1 share of Disney stock is violating any rules. Just for full disclosure: I’m not a lawyer.
Article Credits:
Contributed-By: Franklin Antonio, Henry Chan Desu
FAQs
It is possible to buy stocks without a broker. In fact, there are three alternatives to using a full-service broker: opening an online brokerage account, investing in a dividend reinvestment plan, and investing in a direct stock purchase plan.
Can I sell stock without a broker? ›
Usually you need to open an account with a broker to buy and sell stocks online. Some publicly traded companies, however, do offer a direct stock purchase plan (DSPP), where you can buy shares directly. Instead of using a broker, the company's transfer agent manages the transaction.
How do beginners buy stocks without a broker? ›
Instead of going through a broker, a company can allow investors to buy its shares directly. With a direct stock purchase plan (DSPP), investors transfer funds from their bank account. The plan administrator then uses this money to buy shares at their average market price.
How do beginners buy and sell shares? ›
Process of stock trading for beginners
- Open a Demat account. To enter the share market as a trader or investor, you must open a Demat account or brokerage account. ...
- Understand stock quotes. ...
- Bids and asks. ...
- Fundamental and technical knowledge of stock. ...
- Learn to stop the loss. ...
- Ask an expert. ...
- Start with safer stocks.
Usually you need to open an account with a broker to buy and sell stocks online. Some publicly traded companies, however, do offer a direct stock purchase plan (DSPP), where you can buy shares directly. Instead of using a broker, the company's transfer agent manages the transaction.
How do I buy and sell stocks myself? ›
Do you want to get started with stock investing to build your wealth? Here's what you need to do.
- Open a brokerage account.
- Decide which stocks to buy.
- Decide how much to buy.
- Choose an order type.
- Place the stock order.
- Build your portfolio.
Do you need a broker? The short answer is no—you don't need a living, advice-giving, fee-charging broker (although you shouldn't rule them out). You do, however, need a brokerage—the online storefront where you purchase stocks, bonds, exchange-traded funds (ETFs), and other investments.
Can I buy stocks on my own without a broker? ›
It's possible to buy stocks without a full-time broker. For instance, investors can use an online brokerage account to trade stocks on their own, or invest using different types of investment plans. But there can be pros and cons to each.
Can you directly buy stocks on your own? ›
Direct Stock Plans — Some companies allow you to purchase or sell stock directly from them eliminating the need to use or pay commissions to a broker. But you may have to pay a fee for using the plan's services. Make sure to read the company's disclosure documents before you enroll.
How do I start trading alone? ›
- Conduct a Self-Assessment.
- Arrange Sufficient Capital.
- Understand the Markets.
- Understand Securities.
- Set up a Trading Strategy.
- Integrate Strategy and Plan.
- Practice Money Management.
- Research Brokerage Charges.
Choose a Low-Cost Brokerage Firm
If you decide to go it alone, consider a low-cost brokerage firm like Vanguard, Fidelity, or Schwab. These companies have low fees and a huge selection of investment options for you to choose from.
Why are brokers needed? ›
A broker is an intermediary between those who want to make trades and invest and the exchange in which those trades are processed. You need a broker because stock exchanges require that those who execute trades on the exchange be licensed.
How much should a beginner put in the stocks? ›
There's no minimum to get started investing, however you likely need at least $200 — $1,000 to really get started right. If you're starting with less than $1,000, it's fine to buy just one stock and add more positions over time.
How can I sell stock immediately? ›
Market Orders
When placing a market order, an investor agrees to sell their shares at the current market price per share. The sell order will be placed immediately or when the market reopens if the order is placed after hours. One upside of market orders is that the trade can usually be executed quickly.
How much stock should I buy as a beginner? ›
Most experts tell beginners that if you're going to invest in individual stocks, you should ultimately try to have at least 10 to 15 different stocks in your portfolio to properly diversify your holdings.
Can I directly buy and sell shares? ›
In order to buy and sell shares of a company, you will need a demat and a trading account. For this, you will have to approach a broker, or a sub broker, registered with SEBI.
Can I be my own stock broker? ›
There are many requirements to becoming an independent broker-dealer. A great starting place is by forming your business. Pursue the appropriate business licenses for your local and state governing bodies. Then, consider pursuing memberships to the various required regulatory bodies like FINRA and the SEC.
What companies offer direct stock purchase plans? ›
Examples of companies that offer direct stock purchase plans are Walmart, Starbucks, and Coca-Cola. Similar to the brokerage model, investors initiate the direct stock purchase by transferring money from their checking or savings accounts, and the money is used to purchase shares.
