Millions of Americans went into panic mode in the aftermath of Superstorm Sandy with news that a bank vault had flooded in Lower Manhattan.
It was one of thousands of buildings underwater but what made this one different is that it contained trillions of dollars worth of stock certificates and other paper securities.
The Depository Trust & Clearing Corporation (DTCC) is a clearing house for Wall Street firms and is said to hold 1.3 million paper certificates for shares, bonds and other financial instruments, including foreign securities, at the organization’s headquarters in Manhattan’s financial district. That’s a lot of expensive paper.
It wasn’t until weeks after the storm that DTCC was able to access the vault and confirm that significant flooding and water damage occurred throughout the facility. The company has issued a statement saying it is too early to determine how many of the physical certificates can be restored and that the restoration process will take some time, possibly months.
Many Americans were able to breathe a sigh of relief when the company confirmed it had electronic records of the content of the vault.
Fortunately, the DTCC has been working on a plan to eliminate physical securities in US markets to make processing more efficient and reduce risks. In a July report, the company said there were 86 percent fewer certificates in its vault than there were in 2000.
The lesson for all investors who hold their own certificates is obvious – there will always be some other crisis, disaster, storm or event that could threaten your ownership papers, and it pays to be prepared for just such an event.