Definition
The Holder of Record is the registered owner of a security or stock at the close of business on the record date. This is the individual or entity whose name is entered in the issuer’s register, making them officially recognized as the owner. These holders have the legal right to dividends, capital gains, and also voting rights.
Phonetic
The phonetic pronunciation would be: “Hoh-lder ov Reh-cerd”
Key Takeaways
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The Holder of Record refers to the person or entity officially registered as the owner of a security or asset, such as stocks, bonds, or property. It’s the individual or firm directly responsible for the asset.
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This official record allows the individual or entity to exercise rights regarding the asset, such as voting rights if the asset is shares in a corporation or the right to sell the asset.
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The Holder of Record is recognized by the issuer as the legal owner and is important for the management and accountability of assets.
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Importance
The term “Holder of Record” is crucial in business/finance since it refers to the person or entity officially registered and recognized by a corporation as the owner of its shares of stock at a specific time. This information becomes critical when the company pays out dividends or issues other corporate communications because these are distributed based on the holder of record. Firms only distribute dividends to the stakeholders listed as holders of record. Therefore, understanding who the holder of record is necessary for correctly managing and maintaining such ownership rights and benefits. It plays a significant role in processing transactions, ensuring the right person receives dividends, voting rights, notifications, and other related benefits.
Explanation
The Holder of Record is an important entity in the world of finance and business as it stands at the intersection of organizations and their shareholders. It is not just a title; it has a critical function to play. This term refers to the individual, firm, or institution that is officially registered as the owner of an asset or security in the records of the issuing entity. It could be stocks, bonds, or any other investment products. Being a Holder of Record ensures accurate tracking, providing the issuing entity – like a publicly-traded company, a clear vantage point to see all the owners of its stocks at any given moment. This allows efficient processing of dividends payment, issuance of annual reports, and notification or exercise of shareholders voting rights, thereby reinforcing transparency.Being recognized as the Holder of Record also goes beyond nominal titling. Since shareholders have stakes in a company, it’s important for the company to know who they’re dealing with, particularly for actions such as delegation of votes during annual meetings, processing transfers of securities, and issuing future dividends. Holders of Record can exercise the rights of shareholders because they are recognized in the issuing company’s books. These rights can include voting in shareholder meetings, receiving dividends, and benefiting from capital gains. In essence, the Holder of Record designation serves as an important conduit for the smooth operation of shareholder rights and transactions between organizations and their investors.
Examples
1. Stock Ownership: Let’s say Mr. Smith owns shares in Apple Inc. His name will be recorded in the company’s register maintained by the transfer agent. The register contains information such as the number of shares Mr. Smith owns and his contact information. Therefore, Mr. Smith is the holder of record for these shares. 2. Bond Ownership: If a municipality issues a bond to fund infrastructure development, the individual or entity who purchases this bond is the holder of record. The issuing municipality will keep record of who owns the bond until maturity. 3. Real Estate Ownership: When Mary buys a house, her name is recorded in the official register as the “Holder of Record” for that property. This record includes important information about the property and details about the owner. This ensures that Mary has legal rights over her property and is officially recognised as the owner.
Frequently Asked Questions(FAQ)
What is a Holder of Record?
A Holder of Record is the person or entity officially and legally recorded as the owner of a security or stock. The name of the holder is enlisted in the issuing firm’s record books.
How is a Holder of Record different from a ‘Beneficial Owner’?
While a Holder of Record is the officially listed individual or entity that owns a stock, the Beneficial Owner is the individual or entity who enjoys the benefits of ownership, despite not being in the official record.
How does one become a Holder of Record?
An individual or entity becomes a Holder of Record by purchasing a stock or security directly from the issuing firm or through a direct stock purchase plan (DSPP), then having their ownership officially recorded in the firm’s books.
What are the main responsibilities of a Holder of Record?
A Holder of Record is responsible for managing their owned assets. This could include voting in corporate matters, handling dividends, and managing any other rights attached to the owned assets.
Why is it important to know the Holder of Record?
It is important because all official communications from the issuing company, including dividend checks, proxy materials, updates, and reports, are sent to the Holder of Record.
Can the Holder of Record and Beneficial Owner be the same person?
Yes, it is possible for the Holder of Record and the Beneficial Owner to be the same individual or entity.
How does a company know who their Holders of Record are?
The company keeps track of its shareholders through its transfer agent who maintains an updated list of all current Holders of Record.
Can the Holder of Record status be transferred?
Yes, in the event of selling or gifting the shares, the status of Holder of Record can be transferred to a new owner. The transfer must be reported to the company or its transfer agent to keep records accurate.
Related Finance Terms
- Shareholder: An individual, institution, or corporation that legally owns one or more shares in a public or private corporation.
- Dividend: A distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders.
- Stock Certificate: A physical piece of paper representing ownership in a company.
- Transfer Agent: A trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances.
- Registrar: An institution, often a bank, responsible for keeping records of bondholders and shareholders after an issuer offers securities to the public.
