What it is:
The beneficial owner is the individual or entity that enjoys the benefits of owning an asset, regardless of whose name the title of the property or security is in.
How it works/Example:
Beneficial ownership commonly refers to two situations:
1.Under U.S. securities law, a beneficial owner enjoys either sole or shared power regarding voting rights in a stock. According to the SEC, this right extends to include stock or securities owned by one person even if the title is held by another person or entity.
2.Beneficial ownership can also refer to a situation where an individual or entity holds the right of ownership even if the stock is registered with another entity, such as a brokerage house. In this case, while the brokerage firm is actually shown as the holder of the security, the investor is the beneficial owner.
For example, Bob buys 100 shares of stock in Company ABC via a brokerage house. Even though the stock is recorded under the broker's name, Bob is the beneficial owner.
Why it matters:
Beneficial ownership is a convenient and safe way of owning stock, especially for investors who want to hold securities without the responsibilities of voting or becoming involved in corporate actions.
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