Government's backing boosts AIC's decision to withdraw their reform petition

Government's backing boosts AIC's decision to withdraw their reform petition

The UK Digitisation Taskforce has unveiled a new Bill of Shareholder Rights, aiming to modernise retail shareholder engagement and voting rights. The proposed changes are designed to streamline processes, improve communication, and ensure transparency.

Key recommendations include the transition to digital share registers and certificates by 2027, the adoption of an intermediated securities chain, and the establishment of a Technical Group to oversee implementation. The Bill also sets out rights that shareholders should have as a "baseline service" provided by intermediaries, such as the ability to exercise rights attached to shares and for issuers to identify and communicate with beneficial owners more directly.

However, the proposed system has faced criticism from shareholder groups like ShareSoc, who warn that it could disenfranchise individual shareholders by forcing them into nominee systems. This shift could potentially weaken direct shareholder engagement and activism rights, such as the rights to inspect registers, receive copies, and submit statements or requisitions at AGMs.

The AIC, Association of Investment Companies, has withdrawn its petition for legal changes to guarantee all investors the right to vote their shares, following an announcement from the UK government regarding the implementation of recommendations from the Digitisation Taskforce. The AIC's petition was part of the 'My share, my vote' campaign, aimed at protecting the rights of retail shareholders often excluded from corporate engagement due to the nominee system used by investment platforms.

Richard Stone, chief executive of the AIC, welcomed the government's support for the campaign. Stone encourages platforms to adopt the measures early, before legislation is passed, to ensure no shareholder is disenfranchised and companies can engage quickly and cost-effectively with their shareholders via email.

Despite the criticism, the recommendations aim to facilitate communication and ensure transparency. One area that the Bill addresses is the elimination of paper share certificates and modernising cash remittances, enhancing operational efficiency.

It's worth noting that one percent of wealth managers and financial advisers completely trust the sustainability claims of funds, according to the AIC. This underscores the importance of enhancing shareholder engagement and voting rights, to ensure retail investors have the information they need to make informed decisions.

In conclusion, the Taskforce’s Bill of Shareholder Rights aims to digitize and intermediated shareholding to improve processes and communications. While it is welcomed for modernising, it falls short in fully protecting individual shareholders’ engagement and voting rights according to critics, who caution that the full benefits of enhanced rights may be undermined by the shift to nominee systems. The debate continues as stakeholders weigh the potential benefits against the risks of the proposed changes.

[1] Digitisation Taskforce, "Bill of Shareholder Rights", accessed April 10, 2023, https://www.gov.uk/government/publications/digitisation-of-uk-shares/bill-of-shareholder-rights [2] Association of Investment Companies, "AIC welcomes government support for 'My share, my vote' campaign", accessed April 10, 2023, https://www.theaic.co.uk/news/aic-welcomes-government-support-for-my-share-my-vote-campaign [3] ShareSoc, "Digitisation of UK Shares: A new Bill of Shareholder Rights", accessed April 10, 2023, https://www.sharesoc.org/blog/digitisation-of-uk-shares-a-new-bill-of-shareholder-rights [4] The Telegraph, "Retail investors could be disenfranchised by UK's digital shareholding plans", accessed April 10, 2023, https://www.telegraph.co.uk/business/2022/01/28/retail-investors-disenfranchised-uks-digital-shareholding-plans/

1. The Bill of Shareholder Rights, unveiled by the UK Digitisation Taskforce, aims to modernize both the business and finance sectors by improving communication and transparency, while addressing issues in politics that affect general-news, particularly the rights of individual shareholders.
2. The AIC's petition for legal changes to guarantee all investors the right to vote their shares was withdrawn following the UK government's support for the digitization of UK shares, highlighting the interconnectedness of business, politics, and finance, and the potential impact of such decisions on general-news.

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