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Comment by Tenoke | Hacker News Reader

It seems wrong though - I am not an American, but if you e.g. own shares in an ETF (or mutual fund), you just own shares in the ETF while they own the shares in the underlying assets.

I am not even sure if there's a legal definition of shareholder, but assuming that there is, I suspect this doesn't cut it and you are simply a stakeholder instead. Feel free to link to relevant materials, if that's not the case.

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By that logic, nobody is a shareholder at all, thanks to the magic of Cede and Co. [1] The only real owners are the holders of the physical stock certificates - and almost nobody does this in real life for numerous reasons.

[1]: https://en.wikipedia.org/wiki/Cede_and_Company

Legally, people make distinctions between different kinds of ownership. So you can be the "beneficial owner" without being the "registed owner".

In fact every public US stock is owned first by Cede and Company. Any public stock you own is a contract with them (via intermediaries). https://en.wikipedia.org/wiki/Cede_and_Company

As far as I understand, Cede's contractual rights make it so you are pretty close to 'owning' the stock compared to ETF/Mutual Fund.

>So you can be the "beneficial owner" without being the "registed owner".

Are you the 'beneficial owner' of an ETF's invested assets or just of the ETF instead?

You are the registered owner of the ETF, but the beneficial owner of the underlying shares.

Not correct. If you own an ETF you do not have voting rights of the underlying stocks. So you are not a beneficial owner of the underlying.

You also do not have "direct" access to the dividends. The fund manager will pool the dividends and pay them out on a regular schedule, after taking their cut of fees.

The IRS defines "beneficial owner" as "the person who is required under U.S. tax principles to include the payment in gross income on a tax return"[1]. Using that definition, you certainly would be a beneficial owner regardless of whether you can directly exercise voting rights or directly receive dividends. The indirectness is the whole point of the distinction between beneficial and registered owners.

[1] https://www.irs.gov/instructions/iw8ben#idm140376280574400

But you don't need to write every stock the Mutual Fund invested in - just the Mutual Fund itself, so this makes it even clearer.

A pretty good criterion would be, I presume, whether you vote your shares for the election of the board of directors. If you vote, you're definitely a shareholder.

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