A nominee is an individual or business chosen to manage assets or undertake transactions in, say, securities or other assets on behalf of another individual or business, which retain ownership of the asset in question. For example, a nominee account is often used by a stockbroker to hold shares that belong to its clients, allowing the stockbroker to buy or sell shares on the client’s behalf. This gives the stockbroker the necessary control to conduct transactions, while ensuring the client retains all rights over the securities, such as voting rights and dividend entitlements.
The client’s shares are held in a nominee account, which is technically owned by a non-trading subsidiary of the stockbroker. This makes sure the client’s securities are ring-fenced from the stockbroker’s own assets and liabilities to protect the client’s investments should anything happen to the stockbroker.
There are other similar but different types of nominees in the business world. For example, when companies own a certain proportion of another business, they get the right to appoint individuals to the board. If company A buys a large enough stake in company B, then they will have the right to appoint a director (or maybe more) to the board of company B. The individuals chosen by company A to sit on company B’s board are known as nominees, empowering them to make decisions as a board member for company B on behalf of company A’s investment.
