What is a Holder of Record?
A holder of record is the officially registered individual who holds ownership of a security and assumes all the corresponding rights, benefits, and responsibilities. This term applies to various investments including stocks and bonds.
Key Highlights
- A holder of record is the registered owner of a security who has all the associated ownership rights, benefits, and responsibilities.
- For stocks, the holder of record typically possesses shareholder voting rights and is entitled to any dividend payouts.
- For bonds, the holder of record is entitled to principal and interest payments.
- The status of holders of record is maintained in a register of shareholders or a comparable ledger.
The Dynamics of a Holder of Record
Holders of record for stocks usually have the right to participate in shareholder votes and receive dividends, provided these are declared. For bonds, the registered holder owns the bond and receives principal and interest payments. When the security is sold, the selling individual forfeits their status as the holder of record. This concept also extends to other types of securities like commodities and derivative contracts.
Securities may exist in either “registered” or “bearer” form. Registered securities involve the issuing company maintaining records of the owner and sending payments directly to them. In contrast, “bearer” securities do not have ownership records associated with them—physical possession itself is considered ownership. Due to potential misuse, bearer forms are now mostly obsolete, with most securities being issued in registered form.
A registered holder is distinct from a beneficial owner, who holds the actual rights but where their holdings are maintained in a brokerage account, usually filed under a bank or nominee in “street name”. Both the registered holders and beneficial owners have the same fundamental shareholder rights, but the way that voting rights are exercised and communications received differ. While holding securities in street name is customary, some investors may still prefer physical certificates, even though it incurs additional transfer costs. The shareholder register plays a crucial role in examining a company’s ownership structure.
The Role of a Shareholder Register
A shareholder register is an actively updated list of a company’s current shareowners. It contains essential details such as name, address, and the number of shares held by each shareholder. Additional details like occupation and the price paid for shares might also be included.
The shareholder register distinguishes from a shareholder list by being continuously updated against the latter’s annual update frequency. This ongoing tracking reveals real-time ownership data essential for corporate governance and transparency.
Related Terms: Beneficial Owner, Street Name, Bearer Form, Shareholder Register.
