Street Name: Custody of Securities

“Street name” refers to securities being held in the name of a broker or another nominee instead of the customer’s name. This practice is common in the financial industry as it facilitates the smoother transfer of shares upon sale.

Simplified Transactions

When securities are held in the street name, it means they are under the broker’s custody. This arrangement removes the need for physical certificates to be exchanged, thus simplifying and expediting the transfer process during sales or trades.

Custodial Safety

Having securities in a broker’s name provides an additional layer of security, as brokers typically have robust systems in place to safeguard these assets against loss or theft.

Regulatory Requirements

According to the Securities and Exchange Commission (SEC), brokers who hold securities in street name must adhere to strict custodial and fiduciary responsibilities, ensuring the safekeeping and accurate bookkeeping of customer assets.

Beneficial Ownership

While the securities are registered in the broker’s or nominee’s name, the customer still maintains beneficial ownership. This means that even though the broker holds the title, the customer retains the right to sell, transfer, or receive dividends from the securities.

Modern Brokerage Accounts

Today, the vast majority of securities are held in street name due to the advantages in transaction speed and security. This is particularly relevant in contexts such as online trading platforms and institutional investment management.

Corporate Actions

Holding securities in street name allows brokers to efficiently manage corporate actions such as stock splits, dividend payments, and rights offerings, ensuring timely and accurate execution on behalf of investors.

Street Name vs. Direct Registration

• Street Name: Securities are held in the broker’s name; easier transfer; broker manages corporate actions.
• Direct Registration: Securities are registered in the investor’s name at the company’s transfer agent; greater control but less liquidity.

Street Name vs. Physical Certificates

• Street Name: No physical certificates; secure electronic records; quick transfer.
• Physical Certificates: Tangible ownership; higher risk of loss or theft; slower transfer process.

Related Terms

• Nominee Account: An account where the assets are registered under a nominee name rather than the actual owner, offering similar benefits to those of the street name securities.
• Beneficial Owner: The true owner of the securities held in a nominee or broker’s name, retaining rights to benefits from the securities such as dividends and voting rights.
• Custodial Account: An account managed by one party (the custodian) for the benefit of another (the beneficiary), often used for minors or for holding street name securities.

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