|
It is always preferable to
hold your shares such that your name is on the share register of the
company. This can only be achieved at present by holding them in the form of
paper share certificates or in a Personal Crest account. If your name is on
the share register, then the company will always recognise you without
question as a shareholder with all the associated rights to dividends, right
to vote, right to attend at General Meetings, right to request resolutions,
and rights to any "perks" that the company may offer shareholders.
At present, if you hold
your shares in a nominee account, you have difficulty in obtaining any of
those, except of course you will normally receive the dividend. But the
nominee operator actually has the right to vote, and has no obligation to
pass that on to you or vote in your interests or wishes. Even if the
proposals currently being discussed for embodiment in the Company Law Reform
Bill do become law, only some some nominee operators (ie. stockbrokers) may
actually enfranchise you, and it will still not apply to "unlisted"
companies such as AIM stocks.
In addition there are
other problems with nominee accounts. Most nominee operators use a "pooled"
nominee structure where your holdings are not separately identified to the
issuer. If a broker went bust, it could be a long time before you could
obtain title to your shares, and there may well be confusion as to who owned
what, with potential "over" or "under" allocations as against what the
company registrar believes is the total holding. If you do choose to use a
nominee account (and of course you have to for PEP and ISA holdings), then
you should look carefully at the financial stability, ownership and
financial strength of the nominee operator.
A further problem, and
this particularly applies to company operated (or "corporate") nominee
accounts, is the problem that if you hold your shares in a nominee account,
only the company can talk to you. If you are on the share register, then
anyone can write to you and communicate any concerns they may have about the
management of the company. But a nominee operator will not normally forward
such communications to you. So you may be left in the dark about problems in
a company, when you would find it useful to know about them.
Some brokers argue that
nominee accounts enable them to provide a cheaper service than other
methods. But that is not supported by the facts. Several stockbrokers offer
Personal Crest accounts at the same charges as their nominee accounts, and
Personal Crest accounts are generally highly regarded by active traders. Not
all stockbrokers offer Personal Crest accounts but many do, and the number
of shareholders using such accounts is growing. Certainly UKSA members are
recommended to look at that method of dealing in shares, if you have not
already done so.
Note that UKSA issued the following press release in
September 2007 when the problems of shareholders who purchased shares from
Pacific Continental Securities (UK) Ltd came to light, following that
company going into Administration:
Press044_Nominee_Problems .
It highlights the dangers of nominee accounts. |
