UKSA has responded to the interim report of the Digitisation Taskforce. The report is a big step forward, and UKSA has replied extensively to the questions asked. But it fails to confront the systemic weaknesses that often force individual investors to abdicate their ownership responsibilities in favour of intermediaries.
As headlined in UKSA’s response, numerous shareholder rights are embodied in company law, which has developed over the last 200 years in response to historic abuses and deficiencies. They exist for two broad reasons: firstly for the good of society so that the country has a well-functioning capital market where shareholders can hold managements to account; and secondly so that minority shareholders can’t be oppressed by majority shareholders.
Unfortunately over the last forty years successive governments have prioritised the interests of the financial services industry over the needs of proper corporate oversight – cheaper share dealing has been encouraged at the expense of corruption of the ownership chain. The control of important UK companies –utilities, major employers, centres of innovation – has passed to intermediaries of uncertain nationality while individual investors have been allowed to cede their ownership rights in exchange for low-cost share dealing.
The report rightly recommends that all ultimate benefit owners must ‘have access to’ ownership rights – an improvement on the current mechanisms. But it wrongly makes this an option to be driven by market forces, opening the system to all the abuses that accompanied Crest membership.
Ownership has obligations as well as rights. Governance obligations shouldn’t be capable of being ceded to those without an interest.
Note: In response to a government enquiry UKSA published a position paper in December 2022.
