What is a Registered Holder?
A registered holder is a shareholder who holds their shares directly with a company. Registered holders have their names and addresses recorded in the company's share registry, which is usually maintained by its transfer agent. Investors who use this direct registration system (DRS), a service offered by the Depository Trust Company, to become registered holders receive a statement of ownership attesting to the number of shares they hold, rather than a physical stock certificate. Registered holders receive all investor information, corporate communications and dividends directly from the company or its transfer agent.
A shareholder can elect to become a registered holder even if the shares are purchased through a broker. A registered holder is also known as registered owner.
Understanding Registered Holder
The direct registration route through which a shareholder can become a registered holder is one of three ways in which a security can be held. The other two ways of holding a security are in street name or through physical certificates. An investor's preference for using one of these three ways of holding securities would be based on factors such as convenience when trading, cost, risk, preferred method of receiving dividends and communications, etc.
Becoming a registered holder is not as convenient or cheap as holding securities in street name, but it is preferable to holding physical certificates, which can be lost, damaged or stolen. While a registered holder can sell a security directly from their direct registration system account, in order to obtain current pricing, the security generally has to be transferred electronically to a broker/dealer before it can be traded.
The Difference Between Registered Holders and Beneficial Owners
A registered holder is distinct from a beneficial owner or holder, whose holdings are held in a brokerage account or by a bank or nominee in street name. But as shareholders of a company, registered holders and beneficial owners have the same rights with regard to voting, receiving dividends and communications, etc., the main difference being the manner in which voting rights are exercised and dividends or communications received.
That said, there are many jurisdictions where only registered holders, also known as legal owners, can exercise the rights. So a registered holder can inspect a company's records and books, vote, and dissent in a merger. Beneficial owners must work through the proxy system to exercise these same rights as they are not the legal owners of the shares. In fact, requests to review the books are often rejected by companies on the grounds that they do not come from a registered holder.