What is a Nominee?
A nominee is a person or entity that takes possession of securities or other assets for the purpose of making transactions on behalf of the owner of the securities or other assets.
How Does a Nominee Work?
For example, let's say that John Doe owns several positions in about 200 companies in his brokerage account. He has collected these positions over the past 10 years of his investing life, and he's ready to let someone else make the buy and sell decisions every day.
John sets up a nominee account and transfers all of his holdings to that account. In a nominee account, the shares are no longer in John's name, though he is the owner of the assets. This allows the brokerage firm to buy and sell the assets in the account without John's written permission for every trade. John still gets the dividends from the stocks, and he still gets to vote his shares when it's proxy season.
Why Does a Nominee Matter?
Nominee transactions make transactions happen faster by allowing people or entities to act as agents for other people and thus conduct business in fewer steps.
