When I buy stock in a company on the stock market, how is my ownership recorded?

You may wonder how your stock ownership is recorded when you purchase stock in a company on the stock market. Your ownership is recorded differently depending on how you purchase the stock. For instance, if you purchase the stock through a stock brokerage, you ownership will only be recorded by the brokerage. The company will have the brokerage as the owner on their records.

You will mostly likely use a stock brokerage when you purchase a stock. The brokerage will use a Stock Record system that helps them keep track of each stock's ownership and the physical location of the securities they are holding. The stock record displays the names of the owners as well as the names of the securities. Since today's brokerage firms hold shares in street name for investors, accurate bookkeeping is necessary for keeping track of the actual owners of the securities.

Street Name is the term used when securities are held in the name of a broker or other nominee, as opposed to holding them in the customer's name. Shares are held in street name because it makes transferring the securities easier. This is because they are held in the broker's custody, rather than having to register in the customer's name and physically transfer certificates.

A shareholder is considered to be any entity that has legal ownership of a company's shares. Having legal ownership means being recorded as the shares' owner by the company: when you buy a stock from another investor, three days after the transaction has occurred your name will appear on the company's record book, and you will be deemed the holder of record. The investor from whom you purchased the shares will at the same time be removed from the book of records.

When you calculate the days for transfer of ownership, you do not count every day in the week. You only count the days that the stock exchange is open. If you purchased the stock on Monday then Monday becomes the transaction day. Three days later would be Thursday. Hence, Thursday would be the date the settlement or the transfer of money and security ownership takes place. You would now be the holder of record.

If the transaction takes place on a Friday, then Wednesday would be the day you would become the holder of record. Unless Monday was a Federal Holiday and then Thursday would be the day you became a holder of record.

Do not, however, think of the period between transaction and settlement as a flex time in which you can back out of the deal. The deal is done on the transaction day. Only the transfer does not complete until a later date. You are the owner even if the transfer has not been recorded. If the stock goes up or splits, you receive the benefits. If the stock goes down, then you also receive the results when you become the owner of record.

Holder of record is the term used to refer to the name of the person who is the registered owner of a security. The company that issues the stock uses the holder of record information to issue dividends and other communications. If the brokerage holds the stock in street name for you, then it is the brokerage's responsibility to pass those dividends and communications to you.

In summary, if you purchase stock through a brokerage your ownership may only be recorded at the brokerage and the holder of record may be listed in the brokerage's name. Also, the day of recording is mostly likely to take place three days after the transaction date, or the day you purchased the stock.

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Categories: Buying and Selling Stocks,

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