GROUP SSa

The dawn of a new era

       

     Owner vs. Owner of Record
   At What Point Do You Become The Owner Of A Stock?

     Although it may sound confusing, shareholder of record  does not denote current ownership of a stock.  Instead, it denotes who owned the stock three business days prior.

     When you buy a stock, you own it the instant the trade is made. However, you are not the owner of record until three business days later.  (See the definition of T+3 Settlement Rule in the column to the left.) That's because it takes three days to settle the trade and it's not until the trade is settled that the company knows you bought it.  Upon settlement (three days after the trade), you are on the company's books as being the registered owner (also known as owner of record or shareholder of record ).

     Say you buy a stock on a Monday. Because of the three day settlement rule, the trade settles on Thursday. Therefore, on Thursday you become the shareholder of record. Now, you bought the stock on Monday but what happens if you sell the stock on Tuesday? That trade doesn't settle until Friday (T+3), so even though you sold the stock on Tuesday, you're still the shareholder of record on Thursday. (That's because your sale doesn't settle until Friday, so as far as the company knows, you're still the owner.)

     Obviously, since you sold on Tuesday, you're not the owner on Thursday, even though you're considered to be the shareholder of record.

     For a more peculiar example (but a very common one), say you buy a stock on a Monday. Because of the three day settlement rule, the trade settles on Thursday. Therefore, on Thursday you would become the shareholder of record.  But what happens if you sell the stock later that same Monday? That trade also settles on Thursday.  Since your sale was after your purchase (on the same day), you are not  the shareholder of record on Thursday.  In fact, in such a circumstance, you are never  the shareholder of record!

    Of course you were  the owner for a short time on Monday, otherwise you wouldn't get to keep the profit (or suffer the loss) when you sold it.  You simply were never the shareholder of record.

     So, being the shareholder of record is not the same as owning the stock.

     And owning the stock is not the same thing as being the shareholder of record.


     For a quick review, there are three important things to
     remember:

     The two terms, owner and owner of record, are not the  
     same thing.

     You become the owner of a stock the instant your buy
     order is executed.

     You become the owner of record  upon the settlement of
     the transaction (unless you sell the stock the same day you
     buy it).

 

Click This Line to Return to Dividends Are Not Free Money

Click Here To Read  What Are Special Dividends?

Comments (24)

000001 TS @ BD +3
 

LOGIN
groupssa.com is a secure and personalized environment. Please provide your username and password. If you have forgotten your username or password, we can resend your login credentials to your email address.
Username:[Required]	*
Password:[Required]	*
Remember my credentials:

DEFINITIONS

Business Day
A day on which the stock exchanges and the banks, agencies & depositories for securities in New York State are open for business. Any day on which the stock exchanges are open but the banks are closed is not counted as a business day for the purpose of calculating dividend ex-dates.

Conditional Dividend/Distribution A dividend or distribution conditional upon an event or circumstance that has not yet happened at the time of declaration.

Declaration Date                           The date a dividend is declared by the company.  The amount of the dividend is also declared except in some cases of a conditional dividend.

Deferred Ex-Dividend Date
An ex-dividend date that occurs one business day after the payment date.

Distribution
The payment of cash or securities that are not part of a company's earnings. 

Dividend
A payment of earnings to shareholders.

Due Bill
A statement of money owed.

Ex-Dividend/Distribution Date     The first day on which a stock trades without the right to receive the dividend/distribution.

Normal Dividend/Distribution
A dividend/distribution amounting to less than 25% of a company's stock price.

Owner of record
The registered owner of a security on the Record Date.

Payment Date                               The day the dividend payment is
made.

Record Date                                 The day a buyer of a stock must be the registered owner (owner of record) to receive a dividend.

Special Dividend                           A dividend that is not regularly scheduled.

T+3 Settlement Rule
The requirement that securities transactions be settled in three business days.  (Before June 7, 1995, securities transactions were settled in five business days.)