“Omnibus” refers to an item which has a number of other items inside it. For example, a book has several different stories of different authors will be called omnibus. Similar is the case of Omnibus account, a combine account of different investors is known as Omnibus account.
Understanding of an Omnibus account
An Omnibus account is the combination of aggregate and large accounts of different investors arranged by financial intermediaries like brokers and banks. These accounts are mostly used by brokerages firms, in which one firms make a single account by combining all of its clients at a second firm. The second firm deals Omnibus account as a single entity for the convenience of brokers.
Omnibus account is trading for several different investors and is not associated with the name of any of them. It is similar like stockholders but their stock is in Omnibus investors account rather than a company. Therefore investors don’t need to involve in stock responsibilities and lot of work is over the shoulders of brokers. Omnibus account works well when brokers are competent enough to run it successfully for long time.
Benefits of Omnibus account
- The payment of dividends is more frequent in Omnibus account as compare to other investments.
- It is highly beneficial, for new investors, because the account is managed by competent and experienced brokers which is minimizing risks and increasing profits.
- The account offer full involvement to its investors that they can check what is going on with their investments.
- These accounts are generally exempted from large redemption fees and are good to gain tax-free advantages.
- Because of multiple participants, it protects identities of single investors as well as from misuse by any intermediary.
- Omnibus allows its investors to take part in foreign markets.
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