Street Name

Holding securities in “Street Name” means that your securities, such as stocks or bonds, are registered in the name of your brokerage firm rather than in your own name. Think of it like this: you own a valuable gold bar, but for convenience and security, you store it in a bank's vault under the bank's name. The bank knows the bar is yours, and you can access it or sell it anytime, but on the master list of all gold bars, the bank is listed as the keeper. In the investment world, this makes you the “beneficial owner”—you reap all the economic rewards, like dividends and capital gains—while your broker is the “registered owner” on the company’s official books. This is the standard, default way most people own shares today. It was created to solve the old, paper-based nightmare of physically moving and signing thousands of stock certificates for every trade.

Why is holding shares in a street name so common? It’s all about making life easier for the modern investor. The system is built for speed, simplicity, and efficiency.

• Frictionless Trading: When your shares are held electronically in your broker's name, you can buy or sell them instantly with a click. There are no paper certificates to mail or lengthy transfer processes to endure. The entire transaction is a digital handshake between brokerage firms.
• Simplified Accounting: Your broker acts like a financial secretary. They collect all dividends and interest payments on your behalf and deposit them directly into your account. They also consolidate all your tax documents and corporate communications, like annual reports, into one convenient place. No more chasing down paperwork from dozens of different companies.
• Access to Advanced Tools: Holding securities in a street name is often a prerequisite for using them as collateral to get a margin loan. It also allows brokers to potentially lend your shares to other traders (like short sellers), a practice for which they typically compensate you.

While the system is generally safe and robust, a savvy investor should always understand the potential downsides. Being a beneficial owner is not exactly the same as being the registered owner.

Because your name isn't directly on the company's ledger, you add a layer between you and the business you own. All communications, from voting materials to annual reports, are filtered through your broker. While you still have the right to vote your shares, it requires the broker to pass the proxy voting materials on to you, an extra step that occasionally can have hiccups.

This is the big “what if” that worries investors. If your brokerage firm goes bankrupt, are your investments safe? Thankfully, in most developed markets, they are highly protected.

• In the United States, the Securities Investor Protection Corporation (SIPC) insures your assets. It protects the custody function of the brokerage, meaning it works to return the securities and cash that are in your account. It currently covers up to $500,000 per customer for securities, including a $250,000 limit for cash.
• European countries have similar investor compensation schemes under the EU's Investor Compensation Scheme Directive (ICSD), which generally protect investments up to a certain value.

Important: These protections cover you if the broker fails, but they do not cover investment losses from bad market bets. If you buy a stock and it drops to zero, that loss is yours to keep!

For many, the convenience of a street name is a perfect fit. But for value investors who, in the spirit of Warren Buffett, see themselves as true business owners, there is an alternative: the Direct Registration System (DRS). DRS allows you to have your shares registered directly in your own name on the books of the company that issued them, removing the broker as an intermediary. You become both the beneficial and the registered owner.

• Why would a value investor do this?
  1. A Deeper Sense of Ownership: It reinforces the mindset that you own a piece of a real business, not just a blinking ticker symbol. You receive all communications directly from the company, fostering a closer connection.
  2. Guaranteed Voting Rights: By eliminating the intermediary, you ensure your vote as a shareholder is sent, received, and counted directly. For investors who want to actively participate in corporate governance, this is a significant plus.
  3. Taking Shares “Off the Street”: When you directly register your shares, your broker can no longer lend them out to short sellers. Some investors do this as a vote of confidence in the company, believing it can help reduce downward pressure on the stock price.

Ultimately, the choice between a street name and direct registration is a personal one. For the vast majority of buy-and-hold investors, the modern street name system is a remarkably safe and efficient way to build wealth. However, understanding the alternative is key to aligning your ownership style with your investment philosophy.