Definitions and clarity20 Oct 2021 16:56
For clarification and learning I place a description below of institutional investors... which I understand much in the same way as nominee accounts. If I wrong, please do correct me.
An institutional investor buys, sells, and manages stocks, bonds, and other investment securities on behalf of its clients, customers, members, or shareholders. Broadly speaking, there are six types of institutional investors: endowment funds, commercial banks, mutual funds, hedge funds, pension funds, and insurance companies. Institutional investors face fewer protective regulations compared to average investors because it is assumed the institutional crowd is more knowledgeable and better able to protect themselves.
Source
https://www.investopedia.com/terms/i/institutionalinvestor.asp
Vs.
A nominee is a person or firm whose name is titled on securities or other property to facilitate certain transactions or transfers while leaving the original customer as the actual or legal owner. In this way, a nominee can serve as a custodian.
A nominee account is a type of account in which a stockbroker holds shares belonging to clients, making buying and selling those shares easier and for safekeeping. In such an arrangement, shares are said to be held in street name.
KEY TAKEAWAYS
In finance, a nominee refers to a person or company who has been entrusted with the safekeeping of investors' securities or property; all of your investments are held in its name, while you retain control.
The securities are held in trust and the nominee is the legal owner, but you hold on to real ownership as the beneficiary.
The broker can buy and sell on your behalf, but your funds are protected if the brokerage goes out of business or your broker tries to swindle you.
The nominee company should be a neutral third party that is separate from the brokerage itself.
Understanding Nominees
Investment advisory firms routinely use nominees to safeguard the assets they manage for their clients. Nominee accounts are the most common method for holding stocks. Stockbrokers prefer nominee accounts because they reduce costs and increase trading efficiency.
An investor's shares are legally owned by a stockbroker's non-trading subsidiary or nominee company. The investor is the stock's beneficial owner and has rights over the shares. The stockbroker records all beneficial owners, trades according to an investor's directions, and passes cash from sales or dividends to an investor.
Source
https://www.investopedia.com/terms/n/nominee.asp
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