Here is a recap of how issuers can identify their shareholders in different zones:
Fully transparent: Shareholder analysis – The legal way
Australia, Hong Kong, Ireland, New Zealand, Nigeria, Norway, Singapore, South Africa, UK
These countries have adopted a variant of the UK’s legislation based on Section 793 of the Companies Act, a law designed to give an issuer the legal right to know exactly who has a beneficial interest in its shares at a given time. A company can approach any body it thinks might be a shareholder anywhere in the world and require it to disclose its position within three working days. Noncompliance is a criminal offense that can result in a disenfranchising penalty (withdrawal of voting rights and dividend) and in some cases a buyback of shares. Based on this legal framework, advisers hired by issuers can perform accurate, disclosure-enabled shareholder analysis.
Highly to moderately transparent: Shareholder ID – Working from the register
Belgium, China, Denmark, Finland, France, Germany, Greece, India, Portugal, Russia, Spain, Sweden, Switzerland
There is relative transparency for issuers in these countries, where shares are commonly held in a domestic central securities depository. But while some countries have introduced proper laws – though often without penalties attached – others haven’t put disclosure obligations into legislation. Access to the register may require a tedious process, and identifying foreign shareholders can be difficult when only custodial intermediaries are made visible without any mention of the beneficial owner. Uncovering the names of those investors requires additional information gained through detective work.
Low transparency: Stock surveillance – Digging into the filings
Canada (National Instrument 54-101), Japan, US (13F)
US companies get information on their shareholder base via the quarterly Edgar filing made by investment funds. There is no disclosure law, so companies rely on data from the public domain and elective disclosure from a minority of non-objecting holders. Different filing rules apply for mutual funds, pension funds and insurance funds, which can lead to companies overlooking important holdings. Canadian firms are in a similar situation, although there is no filing requirement for investors. Japan is another non-disclosure country. While shares are directly registered in nominee accounts at the domestic depository, issuers have no legal recourse for requesting identification of the underlying beneficial owners. The foreign shareholders behind the nominees are often hard to uncover and shareholder ID will be a process of identifying the custodian or nominee name change made by the investor. As a result, performing shareholder ID in non-disclosure markets will rely even more on direct contact with the buy side.#
This article appeared in the fall 2017 issue of IR Magazine
Read final part here
