The term ‘stock power’ refers to a form that must be completed to grant legal power of attorney for the transfer of ownership of securities (stocks) to a new, non-broker owner. A stock power form must only be completed when an owner chooses to take and hold physical possession of stock certificates.

Brokerage firms typically handle the buying and selling of stocks, so the broker handles all of the legal paperwork and documentation required to authorize the transfer of shares to a new owner. In these cases, the stock owner does not need to complete any legal documentation to buy or sell shares.

Today, shares held by the broker on behalf of an owner are held as an electronic record with a broker’s custodian. This eliminates the need for the holding of physical certificates.

Prior to modern electronic record keeping, brokers, lenders and banks would hold the physical shares for their clients the stock owners and stock power forms were very common but completed by the firms.

Stock power forms are still needed today when an individual or legal entity wants to hold physical possession of stock certificates.

When You Need a Stock Power Form

The stock power form is needed for the transfer of physically held shares, to change the name on the account or add a TOD (transfer on death) beneficiary.

The stock power form identifies:

  • the previous owner
  • the description of shares being transferred
  • the stock certificates
  • the cost basis of the shares

It is important to note that a separate stock power form is needed for each account and for each company of stock which will be transferred.

When completing a stock power form, all owners will need to sign and have their signatures guaranteed with a ‘medallion signature guarantee.’ For owners unable to complete the form, as in the case of a transfer to a minor or of an estate after death, the authorized legal representative of the shareowner such as a Power of Attorney, Custodian or Successor Trustee will be required to sign the stock power form and will need a medallion signature guarantee .

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