Making the Stock Market Digital: What It Means for You

The UK government is moving toward a digitised stock market. This means the old system of paper share certificates is finally being retired in favour of a modern, digital-only system. 
 
And it’s about time!

What is Changing?

Currently, many investors hold shares through nominee companies associated with their platform or broker (e.g. Hargreaves Lansdown, interactive investor, AJ Bell). In the eyes of the law, the nominee is the legal owner, while the investor is the Underlying Beneficial Owner (UBO). 

 This indirect holding works well as a means of holding investments, but can often make it hard for investors to get company information, vote or attend AGMs.

The Taskforce wants to move everyone into a fully intermediated system. ShareSoc supports this if—and only if— it is improved to makes things better for you, the individual investor. 

ShareSoc and the UKSA have released a joint statement on the Digitisation Taskforce’s Final Report.
 

The Good News 

• Modernisation: Digital systems are faster and cheaper than paper. 
   

• A “Bill of Rights”: The Taskforce agrees with us that there should be a new law to protect the rights of investors who hold shares through nominees. 
   

• Easier Access: It should become much easier for your investee companies to communicate with investors and to investors to have a say on important decisions.  

Our Red Lines

We have told the government that for this to work, three things must happen:

1. Full Rights: You shouldn’t lose any of your legal rights (like the right to vote or attend meetings) just because your shares are intermediated.
    
2. No Hidden Fees: You shouldn’t be charged extra to exercise your basic rights as a shareholder. 
3. Safety First: Your investments must be protected if your broker or platform goes bust. 
    

Where We Disagree with the Report

There are two technical points where we believe the Taskforce got it wrong:

• Email addresses: The report suggests that email addresses should be hidden from the public register. We think this makes it harder for shareholders to talk to each other and hold boards to account. 
   

• The Headcount Test: When a company is being taken over, there is currently a rule that ensures a majority of people voting agree, not just a (super)majority of shares voted. The Taskforce wants to scrap this; we want to keep it.  

Conclusion

This is a critical moment for the UK markets. Done right, it will give retail investors more power and better access. Done wrong, it could leave them without important protections.