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“In street name” is a stock custody system where the brokerage firm’s name and address are on the stock certificate instead of the investor’s. All tracking is done in-house, making it easier and faster for investors to sell. The shares are confidential, and the brokerage firm uses electronic tracking to ensure each share goes to its owner. This method is easier and more confidential for investors and brokerage firms.
“In street name” is a type of stock custody system used by brokerage firms in which the name and address of the business – rather than the investor’s name and address – are placed on a stock certificate. To ensure that the company knows exactly how many shares each investor owns, all tracking is done in-house. One of the main advantages of a street name sharing is that it is much easier and faster for investors to sell. The shares are placed in the name of the company, not the investor, which also makes the investor’s unit number confidential.
When a share is issued, the owner’s name must be printed. With the street name, all shares are filed electronically and registered under the brokerage firm’s address, although the firm does not actually own the share. The brokerage firm does not have the legal authority to claim true ownership of the share, so the company is unable to sell the share without the owner’s permission. These stocks are among the most common among investors.
To ensure that each share in the street name goes to its owner, the brokerage firm uses electronic tracking. Each share has a number associated with it, and the share database links this number to the real owner of the share. This way, the brokerage firm is able to keep track of who owns which stock, without any confusion.
Using a street name share is much easier for brokerage firms and investors. If the stock is listed under the real owner’s name, and not that of the company, additional steps must be taken when the investor sells the stock. The firm would have to find the exact paper certificate, send it to the issuing company, and wait for the company to change the name on the share from the original owner to the new owner. This extra work makes selling stock take much longer if the brokerage firm isn’t listed as the owner.
Another advantage of using the street name method is confidentiality, especially for investors who buy a large number of shares. The issuing company, or any other entity, cannot keep track of how many shares an individual investor has, because all shares are listed under the company name. Unless the investor voluntarily makes the information public, the number of shares will be held on a confidential basis by the brokerage firm.
Smart Assets.
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