Holder of Record

A holder of record is the owner of a company's securities as recorded on the books of the issuing company or its transfer agent as of a particular date.

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

  1. 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.

  2. 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.
  • 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.

  • 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

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

### What defines a holder of record? - [x] The owner of a company's securities as recorded on the books of the issuing company or its transfer agent. - [ ] The person who keeps the records of a company's financial transactions. - [ ] A temporary holder of company shares. - [ ] The broker managing the investor's account. > **Explanation:** A holder of record is the owner of a company's securities as registered in the company's books or its transfer agent as of a specific date. ### When does a company determine the holder of record? - [ ] On the payment date. - [x] On the record date. - [ ] On the date of purchase. - [ ] On the ex-dividend date. > **Explanation:** The record date is used by the company to determine which shareholders are on record and thus eligible to receive dividends or other corporate benefits. ### Who manages securities records on behalf of the company? - [ ] Shareholders. - [ ] CEOs. - [x] Transfer agents. - [ ] Bankers. > **Explanation:** Transfer agents are responsible for managing and maintaining the records of a company's securities. ### Can shareholders sell their shares after the record date and still receive dividends? - [x] Yes, if they held shares on the record date. - [ ] No, they must hold it until the payment date. - [ ] Only if approved by the company. - [ ] No, dividends are based on holding on the payment date. > **Explanation:** Shareholders who hold the stock on the record date will receive the dividend even if they sell the stock before the payment date. ### What role does the holder of record play in shareholder meetings? - [ ] They cannot vote at all. - [ ] They observe but cannot participate. - [x] They are eligible to vote. - [ ] Their voting rights are suspended. > **Explanation:** Holders of record as of the record date are eligible to vote in shareholder meetings. ### What happens if you buy shares after the record date and before the payment date? - [ ] You will receive the upcoming dividend. - [x] You will not receive the upcoming dividend. - [ ] You gain extra voting rights. - [ ] You receive a bonus share. > **Explanation:** Purchasers of shares after the record date will not receive the upcoming dividend, as they are not on the record as of that date. ### What is the primary benefit of being a holder of record? - [x] Eligibility to receive dividends. - [ ] Increased market value of shares. - [ ] Longer holding periods. - [ ] Higher interest rates on shares. > **Explanation:** Holders of record are entitled to receive dividends and participate in shareholder meetings or other corporate actions. ### What does a transfer agent help manage? - [ ] Market prices. - [ ] Quarterly earnings. - [x] Shareholder records and transfers. - [ ] Employee stock options. > **Explanation:** Transfer agents manage shareholder records and facilitate the transfer of securities among holders of record. ### How can one find out their status as a holder of record? - [ ] Check the stock market. - [x] Contact the transfer agent. - [ ] Ask the company’s CEO. - [ ] Verify bank account records. > **Explanation:** To verify one's status as a holder of record, they would need to contact the transfer agent who manages the company's investor records. ### Who decides the record date for dividends? - [ ] Shareholders. - [ ] Tax authorities. - [x] The issuing company. - [ ] Market regulators. > **Explanation:** The issuing company decides the record date when declaring a dividend to identify which shareholders are entitled to receive the payment.

Thank you for exploring the comprehensive concept of Holder of Record with us and tackling the quiz to deepen your understanding. Keep striving for excellence in your financial knowledge!


Wednesday, August 7, 2024

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