When you buy securities through a brokerage firm, most firms will automatically put your securities into street name. This means your brokerage firm will hold your securities in its name or another nominee and not in your name, but your firm will keep records showing you as the real or "beneficial owner." You will not get a certificate, but will receive an account statement from your broker on at least a quarterly and annual basis showing your holdings.
Street Name Registration
You may have your security registered in street name and held in your account at your broker-dealer. Many brokerage firms will automatically put your securities into street name unless you give them specific instructions to the contrary. Under street name registration, your firm will keep records showing you as the real or "beneficial" owner, but you will not be listed directly on the issuer's books. Instead, your brokerage firm (or some other nominee) will appear as the owner on the issuer's books.
While you will not receive a certificate, your firm will send to you, at least four times a year, an account statement that lists all your securities at the broker-dealer. Your broker-dealer will also credit your account with your dividend and interest payments and will provide you with consolidated tax information. Your broker-dealer will send you issuer mailings such as annual reports and proxies.
The advantages of letting your brokerage firm hold your securities in "street name" include:
- Because your securities are already with your broker, you can place limit orders that direct your broker to sell a security at a specific price.
- Your brokerage firm is responsible for safeguarding your securities certificates so you don't have to worry about your securities certificates being lost or stolen.
- Your brokerage firm may keep you informed of important developments, such as tender offers or when bonds are called.
- It is easier to set up a margin account.
The disadvantages include:
- You may experience a slight delay in receiving your dividend and interest payments from your brokerage firm. For example, some firms only pass along these payments to investors on a weekly, bi-weekly, or monthly basis.
- Since your name is not on the books of the company, the company will not mail important corporate communications directly to you.