What's the impact of T+3?

• Author: Emerick, Betty
• Position: Settlement of stock and bond trades within three days after transaction; brokerage accounts

Starting June 1995, the Securities and Exchange Commission requires that most stock as well as corporate and municipal bond trades be settled within three business days after the trade date, instead of the five days currently allowed. This industry-wide change will affect all investors.

The proceeds from securities you sell will be available sooner under the three-day settlement rules. The shorter settlement cycle is also expected to increase efficiencies in the stock market. However, this change may mean that there will not be sufficient time to mail your securities to settle your trades. Maintaining your securities in a brokerage account may be the way to put time on your side.

There are many other benefits to holding securities on deposit in a brokerage account, including: not worrying about lost or stolen securities; the expense of storing your stock certificates; free reinvesting of dividends in additional shares; and simplifying tax reporting, estate planning, insurance protection, money market access and consolidated statements.

Here's an in-depth look at how you can benefit from the new regulations:

* For lost or stolen securities, the paperwork and bonds that may need to be posted can be time-consuming and costly.

* Shares can often be held in street name at a brokerage firm at no charge, thus avoiding the cost of a safety deposit box. In addition, all changes due to name changes, mergers, acquisitions, etc., are simpler to accomplish.

* At the end of the year, one IRS Form 1099 is provided for all investments in your account, thus saving time and greatly simplifying your tax reporting.

* Estate planning is simplified by having securities on deposit in your brokerage account. Time and money are saved by having only one set of documents to settle the estate. Be aware that if you choose to hold certificates rather than place them in a brokerage account, transfer agents will require one set of documents for each issue.

* Securities at many brokerage firms are...