Doing the paperwork
So you’ve just bought shares in your first company. Congratulations, and welcome to the world of share ownership! Before too long, you’ll start receiving a bit of paperwork. It might seem a bit confusing, but there’s really nothing too it once you understand it.
Contract note
The first lot of paperwork you’ll receive after buying shares is a contract note from your broker. This is your confirmation of the transaction so keep it in a safe place. In fact, you need to keep records of all your transactions as you will need them later.
The contract note tells you the company you’ve bought shares in, the settlement date, and the total amount due. If you’re a new investor, your broker will probably have asked you to provide the funds upfront anyway. For any future purchases you must provide funds to your broker within three days—the standard settlement date to which all market participants must adhere. If you fail to provide funds within three days, the broker is entitled to pass on a fine to you.
Share registry
The second lot of paperwork you will receive is from the share registry. The registry maintains the list of all shareholders and processes the ongoing documentation the company will send to you.
Examples of some of this paperwork the registry will initially send you are forms for ‘notification of tax file number’ and ‘direct depositing of dividends to a bank account’. Often you can also decide whether you would like to receive paper reports from the company, or just receive an email notification when reports are available on the company’s website.
If you take part in the Australian Stock Exchange’s CHESS electronic share transfer system—and most brokers prefer that you do—you’ll also receive holding statements that notify you of your holding in the company. These documents have replaced share certificates, which are no longer issued, indicating that the shares are held electronically by your broker.
So what happens when you eventually sell those same shares?
Well, you’ll receive another contract note from your broker advising you of the transaction. If you take part in CHESS, you won’t need to notify your broker of any details for settlement within the usual three-day period. The transfer will be processed automatically.
Now, if all this paperwork sounds daunting, it isn’t really. You can just pop it all in a folder, but please keep your contract notes. That’s because you will need them to complete your tax return after you sell. We’ll look at this further in the section on capital gains.
