Holder of Record

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 27, 2024

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What Is a Holder of Record?

The holder of record is the person or entity officially recognized as owning a security or stock at a specific point in time.

These records are essential for administrative purposes, ensuring that dividends, rights, and notices are accurately directed to the rightful owner.

The holder of record is noted in the company's register, making this designation critical for the accurate management of securities.

Understanding who the holder of record is proves vital for investors and companies alike.

It determines who is entitled to dividends, who can vote in shareholder meetings, and who receives notifications about important corporate actions.

This status affects the flow of information, the allocation of benefits, and the exercise of rights within the investment landscape, highlighting its significance in maintaining the integrity and efficiency of financial markets.

Role of the Holder of Record in Corporate Actions

Dividend Distribution

For dividends to reach the right pockets, companies must know their shareholders of record.

This process ensures that the distribution of profits is fair and reaches those who legitimately owned the stock on the declared record date.

It's a meticulous task that upholds the principle of rightful ownership in the realm of investments.

Voting Rights in Shareholder Meetings

Shareholder meetings are crucial for corporate governance, and the holder of record plays a key role in this process.

These individuals or entities have the right to vote on significant matters, influencing the company's direction.

Their votes can shape corporate strategies, elect board members, and make decisions that impact the company's future.

Proxy Voting and Proxy Solicitation

Proxy voting allows holders of record to vote without being physically present at shareholder meetings.

This process is facilitated through proxy solicitation, where companies reach out to shareholders to collect their votes on essential issues.

It's a vital tool for engaging shareholders and ensuring their voices are heard, regardless of their location.

Tender Offers and Mergers

In the case of tender offers and mergers, the holder of record's status becomes particularly important.

These individuals or entities must be accurately identified to receive offers to purchase their shares or to be informed about merger proposals.

It's a delicate operation that requires precision to ensure all eligible shareholders are given the opportunity to participate in such corporate decisions.

Methods for Identifying Holder of Record

Review Shareholder Records Maintained by the Issuing Company

Companies maintain detailed records of their shareholders to accurately identify holders of record.

These records are meticulously updated to reflect purchases, sales, and transfers of shares.

They serve as the primary source of truth for determining who holds rights and benefits associated with securities.

Examine of Securities Transfer Documents and Ownership Certificates

Transfer documents and ownership certificates are crucial in tracking the movement of shares between parties.

They provide a paper trail that helps in identifying the current holder of record, ensuring that securities are rightfully transferred and recognized.

Communicate With Transfer Agents or Securities Depositories

Transfer agents and securities depositories play a pivotal role in maintaining accurate records of share ownership.

Communication with these entities is essential for verifying holder of record information, especially for publicly traded companies where share ownership can frequently change.

Transfer of Ownership and Changes in Holder of Record

Stock Transfers and Ownership Changes

The transfer of stock from one party to another results in a change of the holder of record. This process involves the completion of transfer documents and updating the company's shareholder register. It's a critical step in ensuring that all rights and benefits transfer along with the ownership of the stock.

Updating Holder of Record Information

Keeping the holder of record information up to date is vital for both companies and investors.

It ensures that dividends, voting rights, and other shareholder benefits are accurately allocated.

Regular updates to this information help maintain transparency and efficiency in the management of investments.

Legal and Regulatory Considerations

The transfer of ownership and changes in holder of record status are governed by legal and regulatory frameworks.

These rules ensure that transfers are conducted fairly, preventing fraud and protecting investor rights.

Adherence to these regulations is mandatory for the smooth functioning of financial markets.

Risks Associated With Being a Holder of Record

Proxy Voting Irregularities and Fraudulent Activities

Proxy voting, while essential for shareholder participation, is susceptible to irregularities and fraud.

Incorrect holder of record information can lead to unauthorized voting, affecting corporate governance and shareholder rights.

Vigilance and verification processes are critical in mitigating these risks.

Conflicts of Interest and Insider Trading Concerns

Conflicts of interest and insider trading pose significant risks in the context of holder of record.

These issues can arise when individuals with access to sensitive information exploit their position for personal gain.

It underscores the importance of strict compliance and ethical standards in investment practices.

Securities Regulations and Reporting Requirements

Securities regulations and reporting requirements are designed to protect investors and ensure market integrity.

Holders of record and companies must navigate these rules carefully to avoid penalties and maintain trust.

Compliance is not just a legal obligation but also a cornerstone of investor confidence.

The Bottom Line

The holder of record is the officially recognized owner of a stock or security, pivotal for determining entitlements like dividends and voting rights.

Holders of record are responsible for keeping their information current, participating in shareholder decisions, and responding to corporate actions.

Identification involves reviewing shareholder registers or consulting with transfer agents, while transferring ownership requires completing transfer forms and ensuring the change is recorded.

Risks include potential for fraud, voting irregularities, and regulatory non-compliance, underscoring the importance of accurate record-keeping and active participation in corporate governance.

In essence, the holder of record concept is fundamental in the financial markets, ensuring orderly rights execution and maintaining investment integrity.

Holder of Record FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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