No Pain No Gain: Small shareholders have been marginalised, but don’t give up

Most small shareholders have been marginalised – thanks to the Crest system of internet dealing and recording, alongside stockbroker nominee accounts

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Small shareholders continue to receive a raw deal in the City.

Indeed there is plenty of evidence indicating that their positions have worsened in the internet age.

I remain a traditional investor, collecting paper share certificates and retaining the right to take investment decisions, vote on resolutions and attend the yearly shareholders’ meeting – and, if I thought it necessary, quiz directors. I, in effect, employ. I am, therefore, on the shareholders’ register. In other words I am one of the owners, in a tiny way, of the business.

But most small shareholders have been marginalised – thanks to the Crest system of internet dealing and recording, alongside stockbroker nominee accounts. Using such accounts means investors are off the register, often no longer enjoy voting rights and cannot attend AGMs.

According to the respected Investors Chronicle, anyone buying shares in the past 20 years will have “almost certainly” used nominee accounts. Well, I have avoided such impositions. The great appeal of nominee operations is that they are much cheaper than old-fashioned dealing and certification. It is possible to have a personal Crest account that overcomes nominee drawbacks. But they are expensive.

Again, according to IC, there are more than 1 million shareholders still clinging to certificates. I would have put the figure much higher. I believe many caught the investment bug as a result of the pre-internet Thatcher privatisations, when small players were encouraged.

Unfortunately many companies favour nominee accounts, and rely on shareholder inertia.

It is all about saving money. Posting documents to shareholders is expensive, particularly the yearly report that, even in these cost-conscious days, is often an extravagant publication, a symbol of a company’s standing. Most companies demand shareholders contact them if they want to retain paper communications. If they don’t, they are forced on to a computer to retain a connection.

When a company has nothing out of the ordinary to report, shareholders who have opted for paper can expect just one document a year – the annual report.

Small shareholders, of all persuasions, have never been popular in the City. Yet such an important part of the investment community is now more ignored and neglected than ever before, while institutions are still idolised. Another insult facing the small player is the number of times, unlike in Thatcher’s day, they have been prevented from taking part in share flotations.

A disadvantage of being on a shareholders’ register is unwelcome phone calls from boiler-room spivs. But they are easily accommodated.

The No Pain, No Gain portfolio has suffered another profit warning – the second within a month.

After Stock Spirits, the Mears support services group said new social housing contracts are no longer flowing as frequently as in the past. The shares dived to, as I write, 363p, against a portfolio price of 272p. Investec lowered its target from 520p to 450p.

Elsewhere Avation clinched two aircraft leasing deals with a subsidiary of Air India, sending the shares to a new high of 178.5p against the portfolio’s 83.5p. And SnackTime returned to the stock market. The price is 11p against a portfolio investment of 119p.

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