When will the government stop depriving investors of ownership rights?
March 12th was ‘Ownership Day’. This worthy initiative, hosted by parliament, was intended to encourage the active exercise of shareholder rights, by and on behalf of all investors in company shares. But one essential ingredient was missing. Savers investing through nominee accounts cannot enjoy the legal rights of ownership, because this was blocked by parliament when it passed the 2006 Companies Act. Yet the government itself puts savers into nominee accounts by encouraging them to invest in ISAs and SIPPs.
There is more than a whiff of hypocrisy here. The Kay Review has drawn attention to the problem. Vince Cable is aware of it because he commissioned the review. This is not an academic issue. It matters now. The situation is not only counter-productive to more active ownership. It is grossly unjust.
As a concession, some nominee accounts provide what are known as ‘information rights’. Some such account providers also give their investors opportunities to vote. But these are commercial decisions which often carry a charge (a form of rent) and other providers choose to keep their investors in the dark. Some even refuse to tell their investors when a vote is to take place that will result in the compulsory purchase of their shares under a scheme of arrangement.
This is a scandal. It is a scandal of parliament’s making. If the government is serious about wanting more active ownership, with all the benefits to business growth and responsibility that this can bring, it should introduce legislation now to end the scandal. All nominee account users must be given full legal rights over what is their money, their savings. And the government should immediately instruct HMRC to find a way to give legal rights now to users of ISAs and SIPPs, which are currently denied. These are not matters which should be left to financial service firms to decide, nor should they be given an undue voice over these matters by government or parliament.
This is what Professor Kay has recommended, in his recent review of equity markets commissioned by the Department of Business Innovation and Skills. It is what will surely be required eventually by the abolition of share certificates due to be mandated by the EU. There is no good reason to delay.
Make it an ownership day for the true investors. Give them the vote. It is their money, after all. Put them in the judgement seat, not those who simply hold their investments, whose interests may be quite different. Let justice prevail.
