Section 416 of the California Corporations Code contemplates that corporations may issue shares in either certificated or uncertificated form. If the corporations shares are not publicly traded, the holding system is likely to be direct - the shares are registered in the owner's name. When shares are widely held and actively traded, direct holding becomes cumbersome. Thus, an indirect holding system became prevalent for publicly traded corporations in which intermediaries hold shares (whether certificated or uncertificated).
Today, most large U.S. brokers and banks deposit their customers’ securities with, and hold those securities through, the Depository Trust Company (“DTC”), a registered clearing agency acting as a securities depository. DTC's name, however, won't be found on shareholder lists. The reason is that DTC holds shares through its nominee, CeDe & Co. I have long been curious about why a nominee is used. Recently, I came across an answer in a law review article by James S. Rogers, the Reporter to the Drafting Committee for Revised Article 8 of the Uniform Commercial Code:
"The practice of registering ownership in the name of a nominee partnership is the odd by-product of a quirk in the rules concerning the registration of transfer. When a certificate is presented to an issuer's transfer agent for registration of transfer, the transfer agent is bound, at peril of liability for wrongful registration, to assure itself that the person purporting to act as, or on behalf of, the registered owner is in fact authorized to do so. That is why transfer agents require signature guaranties and other evidence of authorization. If securities are registered in the name of a corporation, the thought has been that the only satisfactory evidence of authorization would be a certified copy of a resolution of the board of directors authorizing a particular officer to transfer the corporation's securities. By contrast, for securities registered in the name of a general partnership, the thought has been that the transfer agent can safely act on the instructions of any general partner. Thus, to avoid the nuisance of getting a board of directors' resolution each time a corporation, qua shareholder of another corporation, wishes to register a transfer, corporations commonly have their ownership interest recorded in the name of a nominee partnership, which serves no function other than to hold formal title for the corporate beneficial owner."
"Policy Perspectives on Revised U.C.C. Article 8", 43 UCLA L. Rev. 1431, 1476 n. 78 (1996).
