> The problem is that there is a financial incentive for someone else who is not working with them to buy up the stock, immediately resell it with the normal guarantees (that they will pass on dividends, allow voting by proxy etc.), but not pass on such re-sell information to the exchange/company. Does the exchange/company have some sort of a right to prevent resale unless tenure information is tracked?

Yes, absolutely. That same financial incentive already exists in all sorts of variations. As a result, brokers (i.e. your hypothetical entity that gobbles up all the shares and then loans them or sells economic/voting rights) must be registered with FINRA and are subject to very extensive regulations, including rules from FINRA, the SEC and the public exchanges.

For an example, look at how long and complicated the NYSE rules are, mostly involving member organizations like brokers (click on "Operation of Member Organizations" or any of the other subheadings at the link below and then see, for example, rule 402):

> .30 Securities Callable in Part.—Member organizations which have in their possession or under their control bonds or preferred stocks of issues which are callable in part, whether specifically set aside or otherwise, shall identify each such bond or preferred stock so that their records shall clearly show for whose account it is held, except in the case of [two limited exceptions]

http://wallstreet.cch.com/NYSE/Rules/

Since most stock ownership has become a digital ledger, there are incentives for consolidation toward central custodianship for clearing and settling of trades.

The DTC is part of the subsidiary family of the DTCC, which also operates the NSCC. The NSCC handles security clearing for almost all equities trading in the US (all transaction systems basically report here at the end of their reporting chain).

This basically allows the NSCC to simply update the ownership accounting of a number of shares, as opposed to hunting down the physical stock certificates, validating their authenticity, and then handling the transfer.

This has ultimately greatly reduced the settlement window (from Trade date + however long it takes to find the certificates, to, as of a month or two ago T + 2 days), which allows firms to free up capital (the cash doesn't exist until the trade settles) to commit to other endeavors.

A shorter settlement window (and the consolidation down to a single system), also reduce overall counterparty risk, as once the trade is settled you don't necessarily have to be concerned with the financial well being of the firm you did the trade with.

To oversimplify, property rights are often said to be good against the world, while contract rights are good against specific others.

A share of stock is itself a set of contractual rights, but the record owner has a property right in the share (and often a physical certificate). It doesn't matter if someone takes your share or inadvertently/accidentally sells it to an innocent buyer. It's still yours and you have a better claim to it than any buyer or later holder.

But a beneficial owner of a share held in "street name" has only a contractual right to his shares--essentially a promise from his broker that the broker will have at least [x] shares for him (note this means he does not have a claim to any specific or identifiable shares and his broker surely holds many times more since they'll have many other clients). And on top of that, his broker has an account with DTC that involves a second layer of contractual rights to the stock--essentially a promise from DTC to the broker that DTC will have at least [x] shares for the broker (again not specific or identifiable shares and DTC certainly has many times more shares since DTC holds nearly all shares held in "street name")

If your broker or DTC accidentally or inadvertently disposes of too many shares (and this can happen surprisingly often) you only have recourse against your broker or DTC. The agreements between [you and your broker] and [your broker and DTC] do not bind the new owner of the shares, who has no obligation under those agreements and, as a bona fide buyer + current holder, also has a better claim to the shares than you do.

If that wasn't specific enough, here's a very detailed summary and analysis of the current stock ownership structure and mechanics:

http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article...

The key word is "attenuated". When you have in a drawer the stock certificate issued by the company the situation is much simpler.