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Why don't my shares have voting rights?

Q&A: One IC reader wants to know why she can't receive company paperwork or vote on company matters despite owning company shares
January 30, 2015

An IC reader has found herself dismayed by her lack of ability to engage with the companies she holds shares in. "I have a number of GlaxoSmithKline (GSK) shares held in a fund and share account at Hargreaves Lansdown. I have followed the Novartis deal with interest, but had no paperwork," she says. "Today, I was told by Hargreaves that I would have to ring them and pay each time I wanted to register to vote. Surely this means votes will occur with large numbers of shareholders not voting?"

Unfortunately, yes. If you hold your shares in a pooled nominee account your securities are held in trust and your broker is able to move and sell securities on your behalf.

Only paper certificate shareholders or personal Crest members, who are listed as the owners of their shares, will be listed on the register automatically receiving invites to vote and attend company meetings. As a nominee account investor, you are the beneficial owner of the shares rather than the owner and won't therefore receive those benefits.

The push to move into pooled nominee accounts was partly motivated by the need to move towards a less cumbersome and expensive mode of trading - lost certificates are expensive to replace and trading takes longer, which can mean investors lose out. However, hefty new charges introduced by brokers have also played a part. In 2013 Charles Stanley, for example, introduced charges adding hundreds of pounds a year to dealing costs for investors not using the company's pooled nominee account.

What can you do?

Beneficial members can take a more active role in company matters, but this depends to a large extent on your broker. There are three ways of exercising a voting right if your shares are held in trust:

■ Being appointed as the proxy by your broker for the shares you hold. This will normally enable you to attend meetings, although you would need to communicate with your broker and company in question to check.

■ Obtaining a 'letter of representation' from the broker in respect of the number of shares you have. This is essentially the equivalent to being appointed a proxy with similar benefits.

■ Proxy forms submitted via brokers. Some brokers have introduced a mechanism that enables them to submit a series of proxy forms to the company, splitting the number of shares into several chunks, or votes.

However, only a small group of brokers offer these services on an automatic basis, free of charge. One of those is Killik & Co, which was one of the first UK brokers to launch a service giving beneficial shareholders the same rights as shareholders.

The service enables managed and advised clients to opt in to receiving shareholder materials, including company reports and shareholder communications either electronically or via post. All clients also have the option to vote (online only) for the UK shares they own. Advised clients can be notified via email of forthcoming votes and sent links to a voting site, while Killik votes on behalf of its managed clients.

Some stockbrokers also offer investors the chance to become Crest members, allowing investors to benefit from electronic shareholding while holding shares directly in their name. Under this system, a special nominee account within Crest is created and the investor can then receive information directly from the company, attend and vote at company meetings and receive shareholder perks, such as discounts on products sold by the company. Redmayne Bentley's Crest Personal Membership Account has no annual charge and no charge for transfer in of holdings, although there is an inactivity fee of £40 if you don't trade during the year. Charles Stanley charges a hefty Crest bill of £240 plus an annual account charge of £480 in addition to transaction charges, while Fidelity ShareNetwork, powered by Charles Stanley, offers Crest for for £5.10 a month.

Alternatively, you could pay £25 per stock to dematerialise your shares (this is not possible for shares held in an individual savings account). You would lose the ability to trade online and would incur extra costs for paper dealing depending on your broker, but would automatically receive company information and hold voting rights.