Final answer:
Canceled paper stock certificates are generally returned to the shareholder after cancellation, marked or physically altered to prevent reuse. The exact procedure varies, hence consultation with the issuing company or transfer agent is advised.
Step-by-step explanation:
When a client uses paper stock certificates, the best practice following cancellation would usually depend on the regulations of the market in which the stock is traded and the policies of the issuing entity. Option 4, which suggests that canceled stock certificates should be returned to the shareholder after cancellation, is generally the most common procedure. After a stock certificate is cancelled, it no longer represents a claim on the assets of the corporation. These cancelled certificates often have historical or aesthetic value to shareholders, which is why they are usually returned.
However, companies and transfer agents have procedures in place to ensure these certificates cannot be fraudulently reused. For instance, they may mark them as 'cancelled' or physically alter them by punching holes through the certificate number. The exact procedure can vary, so stakeholders should always check with the issuing company or their transfer agent for specific instructions.