To be a shareholder of record means you are listed by the company represented by the shares as the official owner of the shares you have purchased. As a shareholder of record you are entitled to shareowner privileges such as voting rights and to receive dividend payments. The Securities and Exchange Commission has established rules on how long it takes to become the recorded shareholder.
Stock Trading Settlement
When shares of stock are bought and sold on a stock exchange, the buyer and seller are required to settle the trade. The seller must deliver the shares and the buyer must deposit the money to pay for the shares with his broker. This process is called trade settlement. In the world of online stock brokerage accounts, this process seems to happen almost instantly. However, the settlement period set by the SEC allows the parties involved in the sale of stock shares to each complete his side of the transaction.
Three Day Settlement
As of July 2012, stock trades must be settled within three days, often annotated as T+3 settlement. When a stock order is filled by a broker, either by phone or electronically, the trade officially settles three business days later. When you buy shares, day one of the three days is the day after you made the trade. You become the shareholder of record on day three. The three days do not include weekend and holidays -- only days when the stock market is open.
Effects of Three Day Settlement
If you want to become shareholder of record by a certain date, you must place your order to buy and have the order filled by your broker at least three business days before the desired date. There is nothing that can be done to make you the shareholder of record before the three days to settle have passed.
Dividend Payment Record Dates
An important event connected with shareholder of record status is the payment of a dividend by the company behind a stock investment. A dividend declaration includes a record date, which is the date on which all official shareholders of record will be entitled to receive the dividend. If you are not a shareholder of record on the dividend record date, you will not receive the dividend payment. Since a stock purchase takes three days to settle, the trading day two days before a dividend record date is called the "ex-dividend" date. Investors who buy shares on the ex-dividend date will not receive the upcoming dividend.
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