What is a Holder of Record?

What is a Holder of Record?

A holder of record is the name of the person who is the registered owner of a security and who has the rights, benefits, and responsibilities of ownership.

A holder of record is the person who is the registered owner of a security and who has the rights, benefits, and responsibilities of ownership.

For a stock, the holder of record typically has shareholder voting rights and receives dividend payouts, if there are any.

For a bond, the holder of record owns the bond and receives the principal and interest payments.

Holders of record may be recorded in a register of shareholders or similar type of ledger.

Becoming the Holder of Record

There are three ways in which an individual or entity (such as a corporation) can become recognized as the holder of record of stock shares. They include:

1. Through a brokerage firm

The most common way of becoming a holder of record is by purchasing stock shares through a brokerage firm. Buyers of stock who acquire shares in this manner are referred to as the “beneficial owner” of the stock shares. Such a method of stock ownership is also referred to as being “the owner in street name.”

While the brokerage firm is still officially the holder of record of the stock, the stock buyer is recognized as the “real and beneficial owner” of the shares. It gives them the rights, benefits, and responsibilities of the holder of record.

2. Direct registration

You can also become a holder of record through what is referred to as “direct registration.” With direct registration, the stock purchaser has their name entered into the stock issuer’s registry of shares and receives a statement of ownership from the issuer.

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Such a manner of becoming a holder of record is most common for employees of the company issuing the stock, who receive stock shares as part of their compensation.

3. Bearer form

The least common way of becoming a holder of record is through what is known as “bearer form.” In bearer form, the individual or entity with physical possession of stock certificates is recognized as the holder of record. Ownership of the stock shares is not officially recorded anywhere.

Therefore, ownership rights apply to whoever is in physical possession of the stock shares. With the advent of electronic trading, the bearer form is becoming less and less common.