What Is a Beneficial Owner?

A beneficial owner is a person who enjoys the benefits of ownership over s൩ome form of prope✤rty, even though the title is in another name.

It can also mean any individual or g𒆙roup of individuals who, either directly or indirectly, has the power to vote or influence the transaction decisions regarding a specific security, such as shares in a companꦚy.

Understanding Beneficial Owners

When a 澳洲幸运5官方开奖结果体彩网:custodian bank holds shares of a 澳洲幸运5官方开奖结果体彩网:mutual fund, or when securities are held by a broker 澳洲幸运5官方开奖结果体彩网:in street name, the true owner is the beneficial owner. However, for safety and convenience, the bank or broker holds the title.

Beneficial ownership may be shared among a group of individuals. If a beneficial owner controls a position of more than 5% of a company or entity, it must file 澳洲幸运5官方开奖结果体彩网:Schedule 13D under Section 12 of the 澳洲幸运5官方开奖结果体彩网:Securities Exchange Act of 1934.

Beneficial owneꦑrship is distinguished from legal ownership. In most cases, the legal and beneficial owners are one and the same, but there are some cases where the beneficial owner of a property may wish to remain anonymous.

When a corporation or other legal entity opens a bank account, the bank must identify the beneficial owners of that entity. This is intended to prevent money launde𝓡ring and tax evasion.

Areas of Beneficial Ownership

Each type of asset has different rules for how beneficial ownership is recorded. Although these rules vary 🉐by jurisdiction, these are ꧟some of the most common standards:

Securities

A🤪s mentioned above, publicly traded securities are often registered in the name of a broker for safety and convenience.

The Securities and Exchange Commission (SEC) recognizes this and has regulated the practice. In private companies, for a number of reasons, a beneficial owner may not want their name as a shareholder of record. So long as they comply with tax laws and other regulations, this⛄ practice is not illegal in itself.

Real Estate

In most countries, real estate registries show the names of the owne💦rs of properties. In some cases, a beneficial owner may not want their name to appear on public records. In such cases, it is common for trustees or other entities to act as legal owner😼s in place of the beneficial owner.

For example, famous artists or politicians may not want their home addresses t🍸o be easily found in public records, so they do not appear personally on title deeds.

Asset Protection

Wealthy individuals may place their property in trusts to protect their assets and plan their estates. In this case, the trust acts as the legal owner of their property, while the trustor maintains control as the beneficial owner♍. Here again, this pra🔴ctice is legal but highly regulated.

Panama Papers

In early 2016, the International Consortium of Investigative Journalists publicized the "Panama Papers." These documents, taken from the archives of the law firm Mossack Fonseca & Co., show in detail the beneficial ownership of several thousands of offshore corporations.

While many were used legally, some beneficial ownership was allegedly hidden for nefarious or illegal motives. The papers revealed the secret business activities and holdings of several public figures, including British Prime Minister David Cameron and Icelandic Prime Minister Sigmundur Gunnlaugsson, who resigned as a result. It also shed light on the web of secret holdings by Russian leader Vladimir Putin.

Newer Rules Regarding Beneficial Owners

On May 5, 2016, the 澳洲幸运5官方ꦜ开奖结果体彩网:Financial Crimes Enforcement Network (FinCEN) fortified and clarified due diligence requirements for banks, brokers, mutual funds, and other financial entities. Most importantly, the new rules require legal entity customers to identify and verify the identities of their beneficial owners when they open an account. These rules took effect on May 11, 2018.

Regulatory Requirements for Benefici𒀰al Ownership

When a broker or other financial ꦇinstitution holds assets on behalf of a corporation or other legal entity, they are required to record the beneficial ownerꦐ of those assets. This is intended to prevent money laundering or the use of financial infrastructure for terrorism financing.

Under financial regulations, a beneficial owner is considered anyone with a stake of 25% or more in a legal entity or corporation. Beneficial owners can also be considered anyone with a significant role in the management or direction of those entities, or any trusts that own 25% or more of an entity.

Advantages and Disadvantages of Beneficia🐭l Ownership

Beneficial ownership can simplify the process of buying and holding certain assets, such as securities. A common example is the stock market. It is rare for someone to take actual possession of the stocks that they buy, which would incur additional paperwork. Instead, their stocks remain in the hands of the brokerage, which holds them in beneficial ownership. This is sometimes referred to as owning the shares in "street name."

However, there are some tradeoffs to holding shares in street name. There may be some delay in communications, as all official messaging from ♔the issuing firm must first pass through the brokerage. There may also be delays in issuing dividends and interest payments.

In shadier circumstances, beneficial ownership may also be used to withhold the actual owner of a property or security. An example might be assets that are legally held by a 澳洲幸运5官方开奖结果体彩网:shell company that is controlled by the beneficial owner. Although such companies are not inherently illegal, they are sometimes used to 澳洲幸运5官方开奖结果体彩网:keep the owner's financial asse🦂ts a🍷 secret.

How Will I Use This in Real Life?

If you've ever bought a share of stock, you have experienced beneficial ownership. Most people do not get stock certificates in their own names—instead, they buy their shares through a brokerage, which acts as the official owner of record on their behalf.

In this situation, the clients are the beneficial owners, even though their names are not on the stock certificates. However, the clients can still vote, receive dividends, and sell shares th𝄹rough a broker, just as if they were the owners of record.

Explain Like I'm Five

A beneficial owner is the person who has actual control over an asset, even though the title is held in another name. This concept is important in corporate law, wꦅhere it is possible for a corporation to be owned by another corporation, w𝓀hich in turn is owned by a third company.

The beneficial owner is a person who has actual control over an asset, regardless of the name on the title. Brokerages often hold the titles to securities, but the beneficial owners are their clients. For trusts and charities, the beneficial oꦿwners are the people with ultimate control over the♍ organization.

The Bottom Line

Beneficial ownership allows someone to benefit from assets that are actually held in the name of a company or other legal entity. This is most common for securities, which are typically registered☂ with🍎 a broker where the beneficial owners are their customers.

In banking, the beneficial owners of a legal entity are those individuals who have a large equity interest or control over the entity's financials. Banks are required to collect this information to prevent money laundering.