The registered owner of the security, known as the holder of record, is the investor who retains voting rights. This means the holder of record is entitled to vote on any corporate action that is decided upon by shareholders. When it comes to short sales, the problem that arises is determining who is the holder of record on the shares being shorted.


KEY TAKEAWAYS

  • The investor that retains voting rights for corporate actions is the registered owner of the security, known as the holder of record.
  • In a short sale, the investor that shorts the shares never owns the shares and is, therefore, never the holder of record.
  • In a short sale, shares are loaned out from the initial owner in accordance with the margin account agreement and sold in the open market.
  • Whoever owns the shares on the record date, whether that be the initial investor or the investor that bought the shares on the open market, is the one who has voting rights.
  • A short sale is the sale of securities that an investor does not own so must borrow in a trade when they expect that the value of the security will decrease.