Who actually holds my shares?Medium

Almost certainly not you, and almost certainly not your broker either. There is a chain, it has several links, and each one changes what you own.

4 min read · 733 words

The short answer: your name is very unlikely to be on the company's register. What you hold is an entitlement recorded by your broker, which is recorded by a custodian, which is recorded at a central securities depository, which is what the register sees. Your statement is the last link of a chain, not the thing itself.

The chain, from the bottom

1. The company's register lists legal owners. For most listed shares, one of the names on it is a depository or its nominee — a single entry standing for millions of holdings.
2. The central securities depository records which participants hold how much. Clearing and settlement is what moves those records when a trade happens.
3. A custodian holds an account at the depository on behalf of its clients. Custody is the seat.
4. Your broker holds an account at the custodian and keeps its own books of who among its clients owns what.
5. Your statement is a report from those books.

Each link exists because the alternative — every buyer's name moving on and off a register within days of every trade — does not scale. What it costs is directness, and every question below is a consequence of that trade.

Nominee, omnibus, segregated

Three words do most of the work here.

• Nominee. A company that holds the legal title while you keep the beneficial interest. The economics are yours; the name on the register is not.
• Omnibus. One account holding many clients' positions together, with the split kept only in the broker's own records. Cheap and normal, and it means the records are the thing standing between you and everyone else in that account.
• Segregated. An account in your name alone, further down the chain. More expensive, and it makes your position visible without reference to anybody's internal books.

Client assets are also meant to be kept apart from the firm's own — that separation is the reason a broker failing is not the same event as a bank failing, and what happens if my broker fails is the page on it. Investor protection covers the backstop where the records turn out to be wrong.

What the chain does to your rights

The rights attached to a share belong to the legal holder, so anything requiring the register has to be passed down the chain to you and your instruction passed back up.

• Voting. Possible in nearly every case, but by instruction rather than by turning up. Each link has its own deadline, so the effective deadline reaching you is earlier than the company's.
• Dividends and corporate actions. They arrive through the chain, and where an action needs a decision — take shares or cash, accept an offer or not — the choice has to travel back up in time. Corporate actions and reading the notice are the pages on this, and the reason the notice looks urgent is that it genuinely is.
• Being contacted by the company. Often not directly, because the company sees a nominee.

The share that was lent out

A holding sitting in an account can be lent to somebody who needs to deliver it, which is what securities lending is. Whether that can be done with yours depends on what you agreed to, and the difference matters more than the fee: a lent share has been transferred, so what you hold in the meantime is a claim on its return plus collateral, and the vote goes with the share rather than with the claim.

This is one of the places where reading the account terms rather than assuming is the difference between two quite different positions. Reading a broker statement is where those distinctions show up in practice.

Can I be on the register directly?

In some markets yes, through a personal registration or an individually designated account. It gives direct rights, direct contact and a position that does not depend on an intermediary's records. It usually costs more, settles more slowly and makes trading less convenient. Which of those matters is a question about what somebody is doing with the holding, and this page describes the mechanism rather than recommending an arrangement.

The one sentence to take away

You almost certainly own a recorded entitlement rather than a registered share, and the chain that makes trading fast is the same chain that turns voting, corporate actions and lending into things that have to be passed along it.