Definition
A holder of record refers to the owner of a company’s securities (stocks, bonds, etc.) as registered on the issuing company’s books or its designated transfer agent. This status is determined as of a specific date, commonly known as the “record date” or “date of record.” The issuing company uses this date to identify which shareholders are eligible to receive dividends, vote in shareholder meetings, or partake in other corporate actions.
Examples
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Dividend Payment: When a company declares a dividend, the payment is made to the holders of record as of a particular date. If you own shares on the record date, you are entitled to receive the dividend even if you sell your shares before the actual payment date.
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Shareholder Meeting: For the purpose of voting on corporate matters, the company’s books are closed as of the record date to determine who the genuine shareholders are and who should receive proxy materials.
Frequently Asked Questions (FAQs)
Q1: What is the difference between a holder of record and a beneficial owner?
- A1: The holder of record is the person or entity whose name is recorded on the books of the company (typically held by a transfer agent), whereas the beneficial owner is the true owner who enjoys the benefits of ownership even though the securities are registered in the name of the nominee, like a broker or custodian.
Q2: How does the record date affect dividend payments?
- A2: The record date is used by the company to determine which shareholders are eligible to receive the upcoming dividend. Shareholders who hold the stock on this date will receive the dividend, even if they sell the stock afterward but before the payment date.
Q3: Can a holder of record transfer their shares before the dividend payment date?
- A3: Yes, the holder of record can transfer their shares after the record date and still receive the dividend because they were the recorded owner on the necessary date.
Q4: What role does a transfer agent play for holders of record?
- A4: A transfer agent manages and keeps the record of the ownership of securities, ensures the integrity of these records, and facilitates the transfer of securities among holders of record.
Q5: How is the record date determined?
- A5: The record date is determined by the issuing company and typically set a few business days before the actual dividend payment date or shareholder meeting.
Related Terms
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Transfer Agent: A financial institution appointed by a company to keep track of the investors who own its stocks and bonds. It also manages the process of issuing new shares and handling corporate events.
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Date of Record/Record Date: The cut-off date used by companies to determine which shareholders are eligible to receive dividends or partake in corporate actions like voting during shareholder meetings.
Online Resources
- Investopedia - Holder of Record
- Financial Industry Regulatory Authority (FINRA) - Guide to Transfer Agents
- Securities and Exchange Commission (SEC) - Corporate Actions Guide
Suggested Books for Further Studies
- “The Business of Investment Banking: A Comprehensive Overview” by K. Thomas Liaw
- “Understanding Options” by Michael Sincere
- “Investment Banking: Institutions, Politics, and Law” by Alan D. Morrison and William J. Wilhelm
- “Securities Regulation: Cases and Materials” by James D. Cox, Robert Hillman, Donald C. Langevoort
Fundamentals of Holder of Record: Finance Basics Quiz
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