Discover the Secret to Getting Your Name on the Shareholder Records

If you’ve been keeping an eye on my columns, you know that I have shares in a few mutual funds. And, if I hold the same mutual funds, would you like to know my personal email or home address? My first instinct is no.

But a register of the names and addresses of individual shareholders is what many organizations representing the “retail shareholder” – ie you and me, not pension funds and investment banks – have been calling for for many years. Now, a petition putting him in front of parliament is a sign that things are heating up.

Created by Archie Norman, chairman of Marks and Spencer, the petition to ‘bring company law into the 21st century’ has the support of two organizations representing retail investors, ShareSoc and the UK Shareholders’ Association.

But more needs to be done. The government will need to see a large number of citizens support this change before spending precious time in Parliament. The petition only got a few thousand signatures in its first two months and thousands more are needed.

That’s why I’m going to sign it, and I think other retail shareholders should too.

Activists are demanding that beneficial shareholders “have the right to direct information” about the listed companies they invest in and that these listed companies be able to know who their shareholders are. They also want to make email a requirement for shareholding registration and have legally recognized digital annual general meetings.

It’s hard to disagree with calls for digital AGMs. These are a brilliant step forward for convenience and participation and if they are managed well, with the right technology, corporate executives shouldn’t be able to change you, for example by not seeing your question.

But I agree with ShareSoc and UKSA that we don’t want to miss physical meetings. The power of a face-to-face meeting is enormous for many reasons. One of the best arguments made is that a good question at a general meeting can have a huge impact on the company’s board, as they see the physical reaction of senior management to the questioner in the room, whereas the same question asked online could have no effect.

The part of the petition relating to the visibility of shareholders is more delicate.

Most investors today use a trust account managed by one of the big investment platforms to buy their shares. This has cost and convenience advantages. But it means you’re not recognized as the legal owner of the shares, just the “beneficial” owner, and the company you’ve invested in doesn’t know who you are. “So?” you might say. “Being a beneficial owner is not something that keeps me up at night.”

But the implications are profound. The government can only estimate how much of the UK stock market is held by retail shareholders (around 30%). It is not possible to obtain a precise figure because only the names of the nominee suppliers appear in the register, which group together thousands of individual holdings. There is a suspicion that a lack of reliable data has long pushed policies benefiting retail investors up the political agenda.

Even if we don’t ignore the work that has already been done. The UK Listings Review, chaired by Lord Hill in 2020-21, followed by the Austin Review in 2021-22, has already called for sweeping reforms. And we are now awaiting the initial findings of the digitization task force to move forward with the modernization of the UK equity framework, which was due to report in spring 2023.

So this new petition builds on the existing momentum. At 10,000 signatures, the government will respond to the petition – it currently stands at 3,600. At 100,000 signatures, it will be considered for debate in Parliament. And I’d like to see MPs discuss shareholder records.

Current legislation provides that the register of companies and the index of shareholders’ names must be consultable free of charge by any shareholder of the company and by any other person upon payment of a fee, provided they reveal the purpose for which they have been using the information.

I suspect you wouldn’t want your friends or family to find out what you own. Nor would you want to be targeted by the marketing of other companies who also want you to be a shareholder. Worse yet, you may worry about charlatans taking over the email addresses of shareholders (many of whom are elderly) and scamming them.

ShareSoc says the risks are the same whether the details are held by the share register or a broker or platform, and the GDPR is there to protect shareholders as well. “Today stock records are held tightly, probably too tight, but privacy is essential. Only a legitimate purpose can be used to request data from a shareholder registrar,” says Amit Vedhara, director of ShareSoc.

Providing a home address could leave people less likely to be scammed than email. Perhaps there could be a middle ground: shareholders could say they are happy to be contacted only under certain circumstances. I’m sure there are workarounds to provide reassurance.

And I’m open to change due to other compelling arguments.

Without your name on the record, if something goes wrong with the candidate, such as a technical failure or fraud, you remain potentially vulnerable. It also prevents applicants from making profits from your stock that you don’t know about, such as stock lending.

There is also the matter of brokerage services taking their share of the pie to liaise between companies and their retail shareholders on voting and AGMs – we want no more, as costs are inevitably incurred and passed on.

However, leaving potential regulatory reforms aside, the most important change needed to help smaller shareholders interact with companies on voting and general meeting matters is for UK listed groups to use plain English. Voting resolutions commonly use sentences that run to 100 or 200 words, while filled with jargon. The term “preemptive rights” often confuses retail investors. These protect a shareholder from losing voting power as more shares are issued.

I find it strange that better communication is not mentioned in the petition.

The United States Securities and Exchange Commission provides guidance to publicly traded companies on disclosures in plain English. Surely it’s easy for the UK regulator to replicate this?

On the communications side, publicly traded companies have largely been left to fend for themselves, albeit with some good initiatives slowing progress.

For example, the Association of Investment Companies has for many years encouraged good communication among shareholders in the mutual fund industry through annual awards.

Interactive Investor, an investment platform that was promote shareholder engagement among his clients, he is also shedding light on communications to companies’ shareholders. It is launching a ‘best practice’ benchmarking scorecard for FTSE 100 companies and the 20 largest mutual funds, created with financial services consultancy, the Lang Cat, and peer-reviewed for relevance and fairness. Can’t wait to see the first scorecard results.

But we need the regulator to join this gear. The United States Securities and Exchange Commission provides guidance to publicly traded companies on disclosures in plain English. Surely it’s easy for the UK regulator to replicate this?

The preface to US guide is written by Warren Buffett, who says: “For more than 40 years, I have studied the documents that public companies file. Too often I have failed to decipher what is being said or, even worse, have had to conclude that nothing is being said.”

Investors have gotten used to poor communications. We deserve better. And maybe I and other shareholders would have signed the petition sooner if it led to this problem.

Moira O’Neill is a freelance writer on money and investing. Chirping: @MoiraONeillInstagram @MoiraOnMoneye-mail: moira.o’neill@ft.com