Lessons From the CBS-NAI Dispute: The Limitations of “Street Name” Ownership in Effectively Exercising Stockholder Rights

October 3, 2018

The vast majority of public company shares are owned in “street name” – e.g., through a broker.

When holding shares in “street name,” a stockholder’s brokerage account reflects his or her ultimate beneficial ownership of such shares, but the records of the issuer (maintained by the issuer’s transfer agent) indicate that the broker (or more often, another intermediary through which the broker holds the shares) is the record holder of such shares.  In the typical case of “street name” registration, Cede & Co., as nominee for the Depository Trust Company, is listed on the issuer’s records as the holder of record of most of the issuer’s shares.  DTC, in turn, keeps its own account records, which list the DTC participants that hold those shares through DTC, including a number of brokers.  Finally, those brokers keep their own account records, listing the ultimate beneficial owners of such shares.  Contrast this with direct registration, sometimes referred to as “record ownership,” where the ultimate beneficial holder holds the shares directly and therefore the records of the issuer indicate that such person is also the holder of record of such shares.

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