The Wealth Management Association (WMA) believes the time is now right for the Government to mandate that those shareholders who hold their shares in nominee accounts (and manage their portfolios with or without advice) should have the right to opt-in to receive the same rights as registered shareholders.
Currently under the 2006 Companies Act, nominee shareholders are not automatically entitled to receive information relating to the companies in which they have invested nor to attend or vote at relevant general meetings. Some firms do offer such a service but it is not widespread. Any automatic right to opt-in should not have to apply to those who hold their portfolio with a discretionary investment manager as it is the investment manager who has been given full discretion to manage that account in accordance with the relevant mandate.
The Department of Business, Innovation & Skills (DBIS) is currently working on the implementation of the Kay Review, one of whose recommendations is for the Government to explore the most cost-effective means for individual investors to hold shares directly on an electronic share register. Professor Kay expressed concerns that the electronic intermediated shareholding model creates barriers to engagement, and uncertainty for individual investors. Allowing shareholders an automatic right to opt-in will go a long way to meet Professor Kay’s concerns.
Liz Field, CEO of the Wealth Management Association, commented: “WMA is keen to work with the Government to ensure that the nominee model is as attractive as possible to shareholders. There are over five and a half million nominee accounts in the UK and giving those who want it the option to receive information about the companies in which they invest, to attend and to vote at the company meetings will help ensure that nominee accounts become even more popular.
We need to ensure that the Government does not mandate all shareholders to receive information and voting rights as it should be the choice of the individual shareholder whether they want to opt-in. This will help ensure that the costs and administration to everyone in the chain – companies, registrars, brokers, and investors – is kept to a minimum. And to ensure a level playing field with registered shareholders we believe that as much as the costs as possible should be borne by the companies.”