The Editor of Investors Chronicle commented on the recently published BIS Paper on the structure of UK share ownership in this week’s edition (see the last article on our blog for more background). He had this to say: “The Department [BIS] finally seems to be coming around to the view that it is, quite simply, not fit for purpose – a view we have held for some time and which I am regularly encouraged by readers to push further. So well done to ShareSoc and UKSA, which have both been working tirelessly to expose the iniquities of the nominee structure – even if markets aren’t getting any easier, they might at least become fairer”. Yes ShareSoc has put in a lot of effort on our campaign in this area and we have a further meeting with the BIS Department lined up.
In the same edition the Investors Chronicle also published a letter from reader Bob Simpson who was affected when his stockbroker went into administration (the problems caused by brokers going bust and how to avoid them was covered at length in the last ShareSoc Newsletter). Mr Simpson had this to say: “The fact that an administrator can demand payment from the asset value of the shares, and has the power to freeze the shares and trade in them can’t be right”. It took him a year and half of hassle to get the final amount of money due to him through and he did not get everything paid back.
As Mr Simpson also pointed out, most people are unaware of the risks they are taking by using nominee accounts. ShareSoc has not asked for nominee accounts to be outlawed altogether but we think they should have very strong “health warnings” attached to them and people should specifically have to opt in to use one. Plus ISA and SIPP accounts should not require the use of a nominee. Those would be partial solutions to this problem, but of course we also need a low cost, electronic replacement for paper share certificates where a holder could buy or sell through any broker and not be reliant on an administrator to do anything at all.