What is a Direct Stock Purchase Plan?
A direct stock purchase plan is a method that allows individuals to purchase shares of stock without using a brokerage firm. When purchased through a brokerage firm, the investor pays a commission based on the purchase price of the stock. When stock is purchased through a direct stock purchase plan, this commission is not required. Many new investors choose a direct stock purchase plan, or DSP, to save money. Not all companies offer DSP plans. In the 1990s, the SEC loosened regulations that were in place for the sale of stock. Loosening of restrictions on this SEC-regulated activity allowed more companies to offer stock to the general public. Companies often prefer that their stock be held by named investors rather than in bulk by companies. By offering a direct stock purchase plan, a company is more attractive to the individual investor. The number of companies that offer direct stock purchase plans have increased greatly in recent years, but not all companies offer DSP plans. Compani