when a broker or other financial institution holds assets on behalf of a corporation or other legal entity they are required to record the beneficial owner 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 8advantages and disadvantages of beneficial ownershipbeneficial ownership can simplify the process of owning and possessing 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 shell company that is controlled by the beneficial owner although such companies are not inherently illegal they are sometimes used to keep the owner s financial assets a secret allows stockholders to control their shares and receive dividends without actually registering in their name can be a convenient way to manage large numbers of assets for securities all communication and dividends must pass through the broker shell companies can sometimes be used to conceal the identity of the beneficial owners for unethical purposes 