Cite as: 507 U. S. 490 (1993)
Opinion of the Court
I
This case involves unclaimed dividends, interest, and other distributions made by issuers of securities. Such payments are often channeled through financial intermediaries such as banks, brokers, and depositories before they reach their beneficial owners. By arrangement with the beneficial owners, these intermediaries frequently hold securities in their own names rather than in the names of the beneficial owners; as "record owners," the intermediaries are fully entitled to receive distributions based on those securities.1 This practice of holding securities in "nominee name" or "street name" facilitates the offering of customized financial services such as cash management accounts,2 brokerage margin accounts,3 discretionary trusts,4 and dividend reinvestment programs.5 Street name accounts also permit changes in beneficial ownership to be effected through book entries rather than the unwieldy physical transfer of securities certificates. See Brown, The Shareholder Communication Rules and the Securities and Exchange Commission: An Exercise in Regulatory
1 An individual investor who opts to retain record ownership of a security will receive distributions directly from the issuer. This case does not concern transactions of this sort.
2 In a cash management account, the broker holds, rather than distributes, dividends and interest paid on a customer's securities. The customer withdraws funds through a check-like negotiable instrument and receives interest on held funds, typically at a rate higher than that offered on passbook savings accounts and negotiable-order-of-withdrawal accounts.
3 In a brokerage margin account, the broker holds the customer's securities as collateral against any margin debt generated by the customer's stock market transactions. Dividends and other distributions may be credited against a customer's margin debt to the broker.
4 In a discretionary trust, the financial institution as trustee enjoys the discretion not to distribute current income but rather to accumulate it for further investment.
5 In a dividend reinvestment program, the beneficial owner authorizes the broker to use dividends to purchase additional shares and fractional shares.
495
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