No Pain, No Gain: Millions to suffer this draconian modernisation
Saturday 28 October 2006
Nine million private shareholders, the Cinderellas of the investment world, are set to suffer more humiliation unless the self-appointed powers that dominate the City indulge in a little common sense.
The battle to retain paper share certificates, for years the accepted proof of share ownership and favoured by most small buy-and-hold investors, is not going well. Two recent surveys have favoured the introduction of some form of electronic registration. I remain convinced that the abolition of certificates would be a retrograde move. It would ignore the needs of the nine million certificates supporting small shareholders, many owing their stock market presence to high-powered Whitehall privatisation campaigns.
The continuing advances in online systems and perceived cost-savings for the securities industry are behind the campaign to consign certificates to the dustbin. It is appropriate that online registration is known as dematerialisation - an awful word that only internet nerds would embrace.
The Institute of Chartered Secretaries and Administrators (ICSA) is the driving force behind the attempts to kill certificates. Earlier this year, it carried out one of those consultations for the Government. The result - predictably - was heavily in favour of electronic registration.
But the whole exercise seems flawed. It was not structured for private investors - the main casualties - and only 206 views were received. In many walks of life, such a small sample would be treated with utter contempt. But no. The fevered dematerialisation brigade is undaunted and pressing ahead.
The 206 replies came not only from shareholders but also from such interested parties as stockbrokers, issuers, nominees, trade organisations and professional groups. I could have told the ICSA that the City likes dematerialisation. Indeed, I would be surprised if any of them voted for certificates.
Yet, even allowing for the heavyweight contingent, 31 per cent favoured the retention of certificates. A further 3 per cent declined to "give an opinion". Others gave qualified responses. So, the 66 per cent in favour, with its strong City element, is hardly a resounding shareholder endorsement. Even online supporters admit it is the small investor in the firing line. Many would face huge difficulties.
Certificates back around 15 per cent of shares - there are some 10,000 paper trades a month - with institutional investors representing the major force in electronic registration. And nullifying City moans that certificates are too costly is the fact that investors who require certificated trades pay extra for the privilege.
TD Waterhouse, the major private client stockbroker, has also conducted a survey that could threaten the continuation of certificates. It polled what it calls a cross section of 750 of its execution-only customers and no fewer than 80 per cent favoured the end of the paper chase "if the new system were to offer the same benefits and rights of ownership that certificates currently offer".
I wonder about the relevance of Waterhouse's contribution. Before the poll, it would have been aware of its customers who like certificates. I know, because I am a Waterhouse-certificated customer and, like others, pay for the privilege. Needless to say, my views were not sought.
Holding shares online is fraught with danger. As systems get more sophisticated, so do the crooks. And there are doubts, as Waterhouse seems to acknowledge, whether shareholder rights will be reduced. It also emerged there could be problems with some PlusMarkets shares. And what about unquoted companies?
With the extra charge for certificates, paper trades must at least wash their face, even if they are more troublesome for the securities industry. Otherwise, they would be banned or priced out of reach. Many small shareholders are buy-and-hold investors. They are not day traders; most would regard a deal a month as overtime. And with approaching half the population not online, it is likely that many would be cut off from their investments.
Dematerialisation advocates should also consider that there is, for example, no pressure for all bank accounts to be online. So why not let paper and electronic share registration continue in tandem? Compulsion is unnecessary and draconian. Surely a nine million-strong army does not deserve such callous treatment?
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Barclays's new life insurance heralds a revolution on the high street
How to protect your assets if the stock markets begin to head south again
Bargain Hunter: Timing is everything in making big savings on beer, wine and whisky
Seven fund superstars to trust with your cash
Mark Dampier: Don't listen to stock market doom-mongers - sit back and enjoy the sun
- 1 Mystery of the Siberian holes at the end of the world 'solved': Scientists offer explanation
- 2 Pope Francis issues top 10 tips for happiness
- 3 Disney heiress Abigail disowns her share of family profits in West Bank company
- 4 Israel's propaganda machine is finally starting to misfire
- 5 Sean Hannity reacts to Russell Brand's Israel-Gaza criticism: 'You're a dumb actor known for your failed marriage to Katy Perry'
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
- < Previous
- Next >
iJobs Money & Business
£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...
£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...
£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000