Why does it matter whether a certificate was issued?

Money!

Collectors assign value to certificates like this (from highest value to least):

(Specimens and proofs are special kinds of certificates, never meant to be issued. Depending on the company, vignettes, and other variables, collectors tend to value specimens and proofs near the top of the scale. (See more at More than you EVER wanted to know about Specimens and Proofs.)

The characteristics of issued certificates.

In ideal circumstances, issued certificates show these features:

So why is it sometimes hard to tell if certificates were issued?

The problem is that there are exceptions to EVERY rule concerning stocks and bonds. There were over 25,000 railroad-related companies that employed hundreds of thousands of humans responsible for issuing certificates. It is not possible for humans to be consistent.

There are hundreds of legitimately-issued certificates that lack one feature that people would agree was necessary. And there are thousands of partially-issued certificates that show many features indicative of full-issuance.

It is important to be able to tell the difference. Collectors assign more value to fully-issued certificates than they do to partially issued examples.

So how do you tell the difference?

Let's discuss these features in order.

Owner's name

In the very early days of European "joint stock" companies, stock certificates and bonds were "bearer" instruments. This means people who held such certificates were considered true and rightful owners, regardless of their methods of acquisition. Therefore, by their very nature, bearer instruments, had significant problems.

Bearer certificates, both stocks and bonds, do NOT show owner's names. Therefore, it is not possible to use this feature to conclusively tell if bearer certificates were issued.

The good thing is that all but a tiny handful of stock certificates issued in the United States were registered instruments. This means that essentially all American certificates indicated owners' names and those names were registered on the books of companies.

With extremely few exceptions, legitimately-issued stock certificates SHOULD show owners' names.

In contrast to stock certificates, half or more of all bonds issued in North America were bearer bonds. That means there were no names to indicate whether certificates were legitimately issued or not.

By the mid-1890s, registered bonds had gained popularity and owners' names began appearing in greater and greater numbers.

Like stock certificates, legitimately-issued registered bonds SHOULD show owners' names. Because of the large amounts of money involved, I do not recall seeing any exceptions to this rule.

President's signature

All stock and bond certificates SHOULD show the signature of a primary company officer. On older certificates, this was the company president. On newer certificates, this was the chairman of the board.

As always, there were huge numbers of exceptions to this rule. Primary officers could have been vice-presidents, presidents pro tempore, and so forth. George Gould is known to have signed many MKT certificates as "3rd vice president."

Only a miniscule number of legitimately-issued stock certificates are known to lack primary officers' signatures. (For further discussion, see also Why do some certificates lack signatures?)

Treasurer's or Secretary's signature

In addition to primary officers' signatures, all legitimately-issued stocks and bonds should also carry signatures of company treasurers or secretaries. Corporate secretaries probably signed more certificates than treasurers, but treasurers' signatures were fairly common on old certificates. Again, there are exceptions to the rule and some companies had lower-level clerks sign certificates. The point is that legitimately-issued certificates should show two signatures.

Trust company signature

In the earliest days of railroading, the industry was typified by small companies with few investors. As time went by, successful companies consolidated and merged into increasingly larger and larger companies with larger and larger numbers of investors. The length of time investors held securities dropped steadily, meaning that companies had to spend more and more time transferring ownership and recording transactions.

Ultimately, it became necessary for large companies to let outside companies sell, transfer, and record their security transactions. (Transfers of bearer bonds were NOT recorded, of course.)

It is hard to pinpoint exactly when trust companies and banks stepped into this role, but their signatures appear sporadically before the 1900s.

The late 1920s were a time of huge security turnover, so large companies depended heavily on trust companies and banks for their certificate registrations.

As these outside service companies became more prevalent, bank note companies printed special lines for trust company and bank registrars. Once this practice became formalized, the number of problematic certificates dropped dramatically. Trust company signatures were the last signatures applied and represented, therefore, the last step where accuracy was checked.

As a rule, IF there is a space for a trust company or bank signature on a certificate, and that signature is blank, then the certificate was probably NOT legitimately issued. There may be exceptions, but those exceptions will be highly rare.

Trustees' signatures

Bonds often have spaces for two or three trustee signatures. Commonly, trustee signatures appear on the backs of bonds, often in the panel meant to be seen when properly folded. Trustees were often important industrialists, so their signatures can carry significant collector value, far above the value of the certificates they appear on. This example shows the signatures of Cyrus Field and Charles Lanier.

As usual, there is no hard and fast rule concerning trustee signatures. Their presence generally implies certificates were legitimately issued and their absence generally implies certificates were not issued.

The main value of checking trustee signatures is to determine how they compare with other certificates of the same bond issue. If other issued bonds of the same series are signed, then trustee signatures are highly indicative of genuine issuance.

If other bonds of the same series do not show trustee signatures, then the absence of signatures carries no implication whatsoever.

Corporate seals

Corporate seals are official impressions made with a handheld, plier-like device. The jaws of the tool hold a circular die, that when squeezed, crinkles and breaks paper in a design that shows a company name.

Corporate seals are used to impress deeds, contracts, and other official documents including stocks and bonds.

Because of their official nature, they are closely guarded. Theoretically, they are meant to be used only by corporate officers in the normal course of official business. Theoretically, every stock and bond issued by a company should carry a corporate seal.

If stock or bond certificates show the impressions of corporate seals, then there is high probability that the documents were officially issued.

However, there are very rare examples of certificates lacking seal impressions. When such certificates have appeared, there was additional compelling evidence that strongly suggested legitimate issuance. Be very suspicious if old certificates (before the era of pre-printed "seals") lack corporate seals.

Many old deeds and documents, including stocks and bonds, show seal impressions on colored paper applied to the body of documents. The seal paper often had a light adhesive on the back. It seems most likely that clerks licked and applied circular or square paper seals prior to impressing with corporate seal tools. The colors of the paper seals was insignificant and highly variable.

Dates of issuance

The dates of bearer bonds are normally printed at the bottom right side of certificates, immediately above presidents' signatures. Virtually all other stocks and bonds carry handwritten, typed, or rubber-stamped dates. Since dates were probably the least important part of certificate issuance, dates are often found missing from legitimately-issued certificates.

By itself, the presence or absence of dates neither proves nor disproves legitimate issuance. However, taken with other features, particularly signatures, the absence of dates can become very important. So, for instance, missing dates combined with missing signatures is nearly conclusive evidence of non-issuance.

Serial numbers

It would be great if we could say that all issued certificates display serial numbers. While this is 99.99+% true, there are a FEW legitimately-issued certificates without serial numbers. To my knowledge, all such certificates are those where serial numbers were meant to be handwritten.

As you can imagine, writing serial numbers by hand was both time-consuming and prone to mistakes. Therefore, just because serial numbers are absent is not proof of non-issuance. Rather, like several other indicators of issuance, they must be considered with other features.

Number of shares or bond value

I feel safe in saying that all legitimately-issued certificates show either numbers of shares or bond values. I do not know of a single exception. Similarly, if certificates lack amounts (shares or currency values). I think you can safely say certificates were not issued.

However..

Partially issued certificates (certificates that were voided for unknown reasons prior to delivery) CAN also show values. And therein lies the typical advice. Certificates that display values, must show additional features that fully confirm genuine issuance.