The UK's Digitisation Taskforce, spearheaded by Sir Douglas Flint, is in the process of shaping a new future for shareholder engagement. This taskforce is dedicated to eliminating paper share certificates and transitioning towards a more streamlined and efficient digital UK shareholding system.
Their primary objective is to establish a cost-effective, hassle-free system that empowers investors to exercise their rights without red tape. Instead, retail investors would hold their shares through nominees who offer enhanced services.
Critical considerations
However, the journey towards genuine shareholder democracy is not without its challenges. If the taskforce proposes that all shares be held through intermediaries, it becomes imperative to ensure that essential shareholder information is seamlessly shared between intermediaries and issuers.
The heart of the matter lies in the current UK share ownership system, which tends to sideline retail investors who engage through intermediaries.In this system, individual investors' names are not directly registered with the companies they invest in. This result is investors grappling with long procedures just to participate in vital shareholder meetings.
It's a catch-22 scenario: issuers struggle to engage directly with their investors, and platforms find themselves constrained in sharing information. The taskforce's recommendations must prioritise cutting through this bureaucratic red tape.
Why the industry needs to work together
While legislation may take months, or even years, there can be steps taken to foster collaboration among intermediaries, issuers, and registrars to improve communication now. Lumi has led the way with a groundbreaking project in collaboration with M&S and Interactive Investor, providing nominee shareholders with access to the AGM. This partnership shows that when intermediaries and issuers collaborate, tangible change can occur.
There is also a mindset shift needed within many businesses. It's high time the industry recognises that retail investors are not the "wild west" of investments; they are a pivotal part of the landscape. Businesses who listen to diverse voices and groups will prove more successful.
The call for digitalisation is not merely about efficiency; it's about injecting democracy into shareholder engagement. Moving away from outdated practices toward a digitally empowered system is incredibly important. The Digitalisation Taskforce's roadmap is an important step forward, but everyone in the proxy chain can work together to bring about real change now.
