Many of us hold shares through a nominee account with an investment platform but a good portion of UK investors continue to have their shareholding directly recorded with the relevant company.

As part of efforts to get rid of paper share certificates, plans are afoot which could effectively remove this option.

Share registrar Computershare says it has between 8.5 and 10 million shareholdings in certificated form. Its head of UK registry Michael Sansom says many people in this position only have one or two holdings. His best guess is there are around five million investors in this category and the number has remained stable for several years.

‘We want to get rid of paper certificates as much as the next person,’ says Sansom. ‘The question which arises is to what extent in future people should have that choice (to have direct legal title on their shares). We believe they should. What is being proposed would take away that choice.’

In a nominee account your shares are held in the name of your broker or platform so, although you are still the ‘beneficial owner’, the companies in which you invest have no clue who you are.

Shareholders who participate directly with a company through physical shares currently have fee-free rights to receive dividends, vote and ask questions at annual and other company meetings as well as taking part in corporate actions like share placings.

These shareholders could end up paying for such rights should they move into a nominee account with an investment platform or broker. While most platforms currently help shareholders to access these activities, not all do so and sometimes there are fees attached.

The taskforce addressing this issue has concluded there are two viable options. The recommended approach is all currently certificated holders will have to find themselves an intermediary. Sansom adds: ‘The other approach is to legislate to remove the need for issuing a paper share certificate. You could digitise the remaining elements of their holding but still allow them to retain direct legal title.’

We reported in May on a petition and ‘Share Your Voice’ campaign launched by Marks & Spencer (MKS) which hit out at the difficulties in having open communication between companies and ordinary shareholders. There is a risk the proposed dematerialisation/digitisation plans could hinder retail investors’ ability to hold businesses to account.

Sansom says that although the consultation period has ended there is a case for anyone affected or exercised by this issue still getting in touch via editorial@sharesmagazine.co.uk before the final recommendations are published, likely at some point next year.

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