The phrase street name securities or "nominee name securities" is used in the United States to refer to securities of companies which are held electronically in the account of a stockbroker or bank or custodian, similar to a bank account.[1] The entity whose name is recorded as the legal owner of the securities is known as the "nominee owner," and that entity has ownership rights in the security.[1] The nominee owner holds those ownership rights on behalf of the true economic owner who is referred to as the beneficial owner.[1]
In the US, Cede & Co., a nominee of Depository Trust Company, is typically the largest stockholder of a company.[1][page needed] In the US where Cede & Co. is the street name holder, therefore, all beneficial rights such as voting rights and dividends flow first to the nominee holder Cede, and then are passed onward, and ultimately to the beneficial owners.[2] In the United Kingdom this is known as holding shares in a nominee account.
As well as the terminology differing between countries, the commercial practice also differs from country to country.
The popularity of nominee accounts, which have existed for over a century, has increased rapidly since the introduction of Internet share dealing in the late 1990s and in some cases stocks can only be held electronically, such as exchange-traded funds, but holding shares in this way can have disadvantages compared to other methods.
- ^ a b c d Balotti, R.F.; Finkelstein, J.A.; Williams, G.P. (1995). Meetings of Stockholders. Wolters Kluwer Law & Business. ISBN 9781567062762. Retrieved 8 January 2017.
- ^ Dentzer, W.T. (2008). The Depository Trust Company: DTC's Formative Years and Creation of the Depository Trust & Clearing Corporation, (DTCC). YBK PUBL. p. 12. ISBN 9780980050851. Retrieved 8 January 2017.