9.1. Forms of Issuance: A Review

Before launching into the uniform practice rules, it will be useful to recall from Chapter Four the different ways that municipal securities certificates can be issued.

Bearer bonds, also called coupon bonds, are bond certificates that do not have the bondholder’s name printed on them but have coupons attached. Anyone who possesses a bearer bond certificate may present a coupon to receive an interest payment and can present the bond itself for payment at maturity. Since whoever happens to possess the bonds is designated the owner, a bondholder can receive interest payments anonymously without having to declare them at tax time.

Registered bonds are also physical certificates issued to the bondholder, but with the owner’s name printed on them and no coupons attached. The transfer agent of the issuer sends the interest and principal payments to the bondholder when due. Registered bonds can be transferred to another individual only with the owner’s signed endorsement. The endorsed certificate must be delivered to the transfer agent, who will then cancel the certificate and issue a new one to the new owner.

Book-entry bonds do not take the form of a physical certificate but exist only in electronic form. Just one master certificate exists, which is kept at a central depository. Ownership of book-entry bonds is recorded by computer at the depository. The bondholder generally is considered the beneficial owner, while the broker-dealer is listed as the record owner. The client receives the benefits of owning the security, but the security itself is registered in street name to the broker-dealer. The broker-dealer is responsible for maintaining a record of beneficial ownership and delivering the periodic payments it receives from the issuer’s transfer agent to its client, the beneficial owner of the security.

Some issuers offer bondholders the direct registration of their securities. In this case, bondholders may