What is Personal Crest Membership?

What is Personal Crest Membership and why should I use it are questions I am often asked. This article aims to supply the answers to those questions.

Personal Crest Membership is one of the three ways in which you can hold shares as a retail client of a UK based stockbroker. The three ways are in a nominee account, as a paper share certificate and as a Personal Crest Member.  Very briefly these are the disadvantages of the first two methods (more information is given on these pages of the ShareSoc web site: http://www.sharesoc.org/basics.html and http://www.sharesoc.org/shareholder-rights.html ):

– Nominee accounts destroy the direct relationship that you have with the companies in which you have invested. They won’t know who you are, and they won’t recognise you as a shareholder because you are not on the share register of the company. Nominee accounts create potential legal problems  as your stockbroker owns the shares you have purchased, not you. If they go bust you can have major problems recovering your assets.

– Paper share certificates cause problems in meeting the 2 day settlement times which now apply, are relatively insecure, and may easily get lost. The EU has mandated that they must be phased out by 2025.

Almost all listed UK company securities are now recorded and trades “cleared” within the Crest system, operated by Euroclear and have been since 2002. This is of course a highly secure electronic system so paper share certificates held by retail clients have to be “dematerialised” into electronic form whenever they are traded. Brokers who operate nominee accounts have electronic accounts within the Crest system and they interact with the Crest system directly.

A Personal Crest Member has a Crest account also, but in that case they have a stockbroker who acts as “Sponsor” and submits the required instructions to the Crest system. This is to a large extent an administrative convenience as retail clients might have difficulty operating such accounts directly, particularly when complex corporate actions need executing. But it also assists with security.

As far as the client is concerned a Personal Crest Account looks very similar to a nominee account. In other words, your broker will provide an electronic system that shows your holdings, and provide trading facilities, and shows your current cash holdings – a Personal Crest Member has a separate linked cash bank account to his Crest account to enable stock purchases to be paid for, and into which receipts from sales are paid.  But there are two differences from nominee accounts, which are:

– Your name appears on the share register of the company after you have purchased a stock, and therefore your ownership of the shares cannot be disputed. More explanation of  the advantages of this are given below.

– Any dividends on the stock are paid directly to you rather than to your stockbroker – either via a cheque send to the address registered for you in Crest, or to your bank if you have recorded your bank details with the registrar. This is a major advantage because although stockbrokers used to pay significant interest on your personal cash holdings, now they generally do not. If it goes directly to you, then you can earn more interest on it.

The advantages of being on the share register of a company are:

– The company in which you hold shares will send you all corporate action notices directly, notices of General Meetings and a proxy voting form. You do not need to get a “Letter of Authority” from your stockbroker to attend an AGM or any other general meeting – indeed you can generally turn up at any such meeting and be recognised as a shareholder with voting rights as long as you can present some form of ID.

– You do not need to rely on your stockbroker to vote your shares (which even if you instruct them to do so, often gets lost), nor follow any special procedures. You will be sent a proxy voting form directly from the company’s registrar which you can easily return in good time.

– The company will send you a paper Annual Report, or an electronic version, or you can opt in to pick them up from their web site. But you will definitely know when it is available.

– Being on the register means that you will receive communications about any special events such as takeover bids, rights issues, requisitioned resolutions, etc, directly from the company. You can also sign third party requisitions and have other rights that are not available if you are in a nominee account. Only certain rights can be passed on by a nominee operator.

– You will also be able to receive any communications from third parties who wish to discuss the affairs of the company with shareholders. Note: this does not mean you will be deluged with junk mail. This used to somewhat of a problem before the “proper purpose” rule for access to share registers was introduced in 2006. Neither does it mean that your name and address being on the register is a security risk as it used to be with paper share certificates because the electronic Crest system is much more secure, only stockbrokers can enter transactions and they have a legal obligation to identify their clients (“KYC” checks). Having your name and address on a share register is no more risky than having it on the electoral roll or in the telephone directory.

In summary there are a number of advantages of Personal Crest Membership over the use of a Nominee Account, with no significant disadvantages. This writer would never wish to use a nominee account if he had any choice (unfortunately at present ISA and SIPP accounts need to be nominee ones). Note that sometimes cost is mentioned as a factor, but in reality some brokers do not charge extra for Personal Crest accounts, although some do make some additional small account charge which is not likely to be significant unless you have a very small portfolio. It does take a stockbroker a bit more work to open a Personal Crest account on your behalf, and it might add  a delay of a week or two. For that and other reasons some brokers have been deterring the opening of new Personal Crest accounts, and many no longer offer them at all (the Wealth Management Association, WMA, have a web page that enables you to identify which brokers offer them). Charles Stanley Direct no longer seems to offer them and although Stocktrade do, they are being taken over by Alliance Trust Savings who do not so they might reconsider their support in due course. However Killik still offer them on advisory accounts. Otherwise you probably need to shop around to find a broker that will support Personal Crest accounts.

Note that one big advantage of a Personal Crest account is that it is very simple to transfer any holdings in such an account to another Crest account.

Other minor points to bear in mind:

– If you still have some paper share certificates it is simple for your stockbroker to dematerialise them into a holding within a Personal Crest account.

– Shares in companies traded on foreign exchanges and “funds” can be held within a Personal Crest account with your stockbroker like any other holding, but they are then effectively in a nominee.  The Crest system only applies to companies who are part of and registered within the Crest system.

– It is important to emphasise that operating a Personal Crest account is almost identical to operating a nominee account on the same brokers electronic platform.  They will look after the administration for you in the same way  – for example when taking up rights issues.

In summary Personal Crest accounts are an invaluable way to ensure your shares are held safely and that you will be recognised as a shareholder by the company. Don’t miss out on this great facility when looking to open a new stockbroking account.

But be careful. Some brokers when you ask about Crest accounts suggest that their nominee accounts (which is all some of them offer and talk about) are Crest accounts. They may be using Crest underneath but you will not have a Crest account!  You need a Personal Crest account.

Roger Lawson

Chinese AIM Companies – Sorbic et al

A good letter in the Financial Times today (29/5/2015) from Sorbic investor John Gunn about how AIM rules have failed to protect shareholders. He said it is “a terrible state of affairs” and suggested the AIM regulations had failed completely to protect shareholders.

Sorbic International (SORB) is an AIM listed Chinese company which has encountered major governance and legal problems and its shares have been suspended. To quote from the latest RNS, after the board fired Mr Wang Yan Ting, the CEO:

Since being replaced as the Company’s Legal Representative for LVST [the operating subsidiary] in China and from the LVST board, Mr. Wang has declined to hand-over the Company’s corporate seals (chops) and business licences, which he removed from the premises before he was dismissed.  The local police were contacted, but deemed Mr. Wang’s non-cooperation as a commercial matter and were therefore unwilling to assist.

As a result of Mr. Wang’s non-cooperation, the bank accounts and the day-to-day operations of the Company still remain under the control of Mr. Wang.  Furthermore, Mr. Wang has confirmed that he has transferred funds belonging to the Company which remain under his control and, to date, he has refused to return them“.

There is more bad news after that if you read the full announcement. John Gunn says that the AIM arm of the LSE has allowed “flaky” Chinese companies to list and complains of complete lack of protection for shareholders under AIM rules.

Investors in Naibu, which is a similar case, have the same complaints  and ShareSoc has commented on both Naibu and Camkids in the past. The investigation of the affairs of some of these Chinese companies by the Nomads before listing surely warrants some examination, and there is unfortunately little incentive for Nomads, who often also act as the company’s Broker, to undertake sound due diligence. The penalties for failings from the LSE are often trivial as it is with any “self-regulated” system.

Yes AIM needs reform to stop these scandals happening, but investors can do a lot to help themselves. Read the AIM prospectus or check a company out using the ShareSoc AIM Scorecard available from our web site. Obviously studying the accounts also helps but they cannot always be relied on – as with any business, being sure you understand the business and can trust the management are even more important. But that is often difficult at such remote distances where legal systems and business culture might be different.

Roger Lawson

Custodian Reit – It always pays to ask

A note from Mark Bentley:

I have been a shareholder in the Custodian REIT (AIM:CREI) since its original flotation in March 2014. It has “done what it says on the tin”, investing in numerous small sized, high yielding commercial properties, to generate income, resulting in an attractive and growing dividend stream for investors. Given the low level of target gearing (25% of NAV), this is a low-risk strategy I find attractive, in this era of negligible interest rates. In January 2015 the company held its first AGM, which was a formality, as the period it related to was before the iPO, when the business was not yet trading. Nevertheless, I attended the meeting, as my first opportunity to meet the REIT’s management and to discuss its plans: I was the only individual shareholder to attend. This was helpful, both in improving my understanding of the company’s business plans and prospects, and also as a means of introducing myself to management.

The value of that became apparent recently, when the company issued a notice of its preliminary results: http://www.investegate.co.uk/custodian-reit-plc–crei-/rns/notice-of-results—9-june-2015/201505181646155578N/ .  In common with similar announcements from many other companies (but against ShareSoc’s recommended best practice), the announcement included mention of a conference call, intended to be exclusive to City analysts. ShareSoc deprecates this practice and encourages all companies to make their analyst calls available to all investors, to ensure a level playing field whereby all investors have access to the same information at the same time. It is my experience that valuable information/explanation, not immediately apparent in the results announcement, is often gleaned from such calls, especially during the Q&A. In the US this issue has been recognised and enshrined in law as “Regulation FD” (Fair Disclosure), which means that all such calls are made available to all investors, often via web conferencing. I therefore contacted the company, to ask to be included in the call, relying on my contact with the company’s management at that earlier AGM. There was some initial reluctance, with the company stating that the call was intended for analysts only (a frequent reaction, in my experience), but the company conceded, when I pointed out the fairness issue and ShareSoc’s stance on this. I am pleased to report that I have today received details of the call and will participate. Kudos to the company for their understanding on this.

There are two morals from this tale:

– It often pays to make the effort to attend company meetings, sometimes for reasons that may not be immediately apparent at the meeting itself.

– A little gentle pressure and the use of ShareSoc’s name can yield results, when trying to get better treatment as an individual shareholder.

ShareSoc will continue to press for UK regulation similar to the US regulation FD , to level the playing field in favour of individual investors. If you run into a similar problem, and are met with a refusal, please let us know. We may well highlight this issue to the press, to help further our campaign for fairness, as well as to increase the pressure on companies to improve their treatment of individual shareholders.”

Mark Bentley

ShareSoc Company Seminar Announcement

The line-up for our next seminar at which public companies will be presenting on the 17th June is now available and registrations are now open. This event is in the City of London, with registration starting at 4.00 pm. Four companies will be presenting this month and answering your questions, which are:

– MERCIA TECHNOLOGIES (MERC): An investment company focussed on growth technology businesses.

– IDEAGEN (IDEA): Compliance based information management software.

– ESCHER GROUP (ESCH): Provider of retail and message based software solutions.

Plus one other company to be advised at a later date.

Refreshments and a buffet will be provided of course and the event is free to Full ShareSoc Members with only a nominal charge for others. You will be able to talk directly to the senior executives of these companies after their presentations. In addition you can discuss them with fellow investors. It is also a good opportunity to socialise with other ShareSoc Members.

To register for the event, or for more information, please go to this web page (click on to access):


Please do not hesitate to contact us if you have any questions on this event, at info@sharesoc.org or phone our office on 020 8467 2686.

Shareholder Friendly Approach from HarbourVest

For once it is good to see a company actively reach out to engage with its shareholders, something ShareSoc applauds and encourages.

HarbourVest Global Private Equity (HVPE) is a Guernsey registered investment trust, which invests primarily in global private equity funds-of-funds, managed by an affiliate of Boston based HarbourVest Partners LLC. It is a substantial trust with a market cap. in excess of $1bn. It is currently listed on the specialist funds market of the LSE, but has been planning a move to the main market for some time.

This afternoon HVPE has announced an invitation to its shareholders to attend an “informal meeting” with the chairman and key executives and managers of the fund, to be held in London on 15th June, at the shareholder-friendly time of 3pm. Video and teleconference facilities are being provided to those for whom it is inconvenient to attend in person. The purpose of the meeting is to discuss changes to shareholders’ rights and corporate governance, ahead of the main market move, and an associated EGM. See the announcement for full details: http://www.investegate.co.uk/harbourvest-global-private-equ–hvpe-/gnw/statement-re-notice-of-shareholder-meeting/20150522114526H3478/

It is all too rare for companies to take the initiative and arrange such meetings with their ordinary shareholders and we encourage more companies to so, as well as facilitating opportunities for companies to meet their shareholders through the regular company seminars that ShareSoc organises. I intend to take the opportunity to meet management by attending this meeting.

HVPE has performed very well over recent years, with 5 year compound NAV growth of 13.6% p.a. and growth of well over 10% in each of the last 3 years. A major reason why the fund is considering the move to the main market is to improve liquidity, which it is hoped will lead to a reduction in the rather wide 18% discount to NAV at which the shares currently trade.

DISCLOSURE: HVPE is currently one of my largest shareholdings

Mark Bentley

Rensburg AIM VCT Wind Up

Shareholders on the register of Rensburg AIM VCT will have received a letter from Bill Nixon of Maven Capital Partners. Maven are an experienced Venture Capital Fund manager and have experience of taking over the management of existing VCTs as the letter indicates. They are proposing to take over the management of the Rensburg AIM VCT instead of the company winding up as the board of directors has proposed.

The company has previously announced that they propose to formally wind up via a members voluntary liquidation and the listing of the company’s shares will be cancelled. It would thereafter have 3 years to dispose of its assets under the VCT regulations during which it would not need to make further investments. Shareholders are being given a vote on this matter and it is exceedingly important that you do vote so as to ensure that your views are taken into account.

We have published a note outlining some of the issues that shareholders need to understand on this matter. It is here: http://www.sharesoc.org/Rensburg-VCT-Wind-up2.pdf .

We may issue more information after seeing the notice of the General Meeting to approve a wind-up which we understand will be issued in June.

Roger Lawson

A Dream Become a Nightmare – And a Plug for ShareSoc

There was a good article in the Daily Telegraph on Sunday (17/5/2015) explaining how Thatcher’s dream of a share owning population has become a nightmare. She tried to create a nation of investors by privatisations and regulatory changes to improve business competition but instead many companies have ended up being sold to foreign buyers.

Even worse there has been a collapse in private share ownership. The reported proportion of UK shares held by individuals has collapsed from 20% in 1994 to 11% today. In addition private shareholders are being stripped of their rights by the proliferation of the use of nominee accounts. The article rightly mentions the ShareSoc campaign against this and quotes us as saying this “fatally undermines your rights as an investor” which is spot on.

There were also some comments in the article from David Nicol of Brewin Dolphin on the need to encourage long term investing, as opposed to short term trading. He suggests reform of the capital gains tax system. It is indeed unfortunate that the system of indexing capital gains was dropped, and it would surely be wise to introduce a lower rate for longer term holdings. The market is becoming more and more speculative and it would be good to incentivise private investors to take a longer term view. With promises made not to raise income tax, there are rumours that the Government might raise capital gains tax rates instead but any changes in this area should encourage share ownership and savings, not deter it surely?

The article calls for Margaret Thatcher’s legacy not to be squandered. It would certainly be good to consider more reforms after her fashion. To read the full Telegraph article by John Ficenec go to: http://www.telegraph.co.uk/finance/11610490/Thatchers-dream-for-UK-investors-has-become-a-nightmare.html

Roger Lawson