The end of paper share certificates?

gt94sss2

From this week's BBC Moneybox

If you are one of the millions of people who own shares directly in a UK company then you may have to give them up. There are just two weeks left to have your say about the future of how those shares are held. It's because paper share certificates are on the way out to be replaced by digital versions. We'll discuss what this means. If want to have your say email digitisationtaskforce@hmtreasury.gov.uk

https://www.gov.uk/government/publications/digitisation-taskforce

masonic

It's been a long time coming.

poppy10_2

"If you are one of the millions of people who own shares directly in a UK company then you may have to give them up."

Irresponsible scaremongering from Moneybox. Nobody is going to have to give up their shares in UK companies. Just the paper certificates

jackieblack

poppy10_2 said:

"If you are one of the millions of people who own shares directly in a UK company then you may have to give them up."

Irresponsible scaremongering from Moneybox. Nobody is going to have to give up their shares in UK companies. Just the paper certificates

I listened to the Moneybox episode yesterday.
AIUI, this statement is because shareholders are going to have to pay a third party/intermediary to deal with the digital shareholdings and that will be unaffordable/uneconomical for some shareholders

Section62

jackieblack said:

poppy10_2 said:

"If you are one of the millions of people who own shares directly in a UK company then you may have to give them up."

Irresponsible scaremongering from Moneybox. Nobody is going to have to give up their shares in UK companies. Just the paper certificates

I listened to the Moneybox episode yesterday.
AIUI, this statement is because shareholders are going to have to pay a third party/intermediary to deal with the digital shareholdings and that will be unaffordable/uneconomical for some shareholders

There are platforms - X-O for example - that charge nothing to hold shares.  The BBC could better fulfill their 'education' remit by explaining things like this, rather than scaremongering people into thinking their shares will be taken away from them.

poseidon1

This is an intiative of which I heartily approve. 

Over the last 40 years part of my career involved obtaining probate for many estates where shares were largely held in certificated form. Invariably, certs would be lost, redundant or incomplete giving rise to costs and delays in obtaining replacements and verifying the correct holdings direct with registrars.

Worse still, were some estates where dividends were received in cheque form and not cashed sometimes over a number of years.

The advent of nominee services  has been a real blessing for probate practitioners in particular, not to mention the many benefits for active investors.

On a separate note, financial literacy education is long overdue in the UK, since small holdings in individual UK shares is a poor way to build wealth over time. 

boingy

I won't miss them either. On behalf of my wife I recently sorted out two paper share holdings of FTSE 100 companies, each of which had been held for well over 20 years and each of which had been enrolled into DRiP schemes so several times per year an extra certificate was issued for a very small number of shares. We could see the total holdings on Shareview but they wanted a king's ransom to sell them and a smaller ransom to convert them to electronic copies so I set out to collect the certificates together - over 100 individual bits of paper. One holding worked out fine, the other had me scratching my head until I realised that the company had done a consolidation some years ago so the older certificates were no longer valid and some of the new certificates had not made it into our filing system Several hours searching and a spreadsheet later and they were in the post to X-O for a free transfer inwards and later sold - total fees £11.90. The things you do to save a few quid (but thanks X-O !) 

gt94sss2

I hadn't realised the way the BBC site had described it when I copied it into the original post.

On Moneybox, there were two specific issues raised.

a) that shareholders may need to pay for nominee services ( I know free ones are available)

b) the potential loss of voting rights, company updates (and I presume shareholder perks though some companies allow this).

I haven't looked recently but think that you can't attend ATMs or vote etc with most nominees.

There is also the fact that you become a beneficial owner in a nominee account and could be at risk of broker failure/FSCS compensation limits.

Then their are some other things which you can't really do with nominee accounts but can with paper certificates such as:

a) transferring ownership of shares without payment, both between family members; and

b) donating shares to a charity; 

wmb194

gt94sss2 said:

I hadn't realised the way the BBC site had described it when I copied it into the original post.

On Moneybox, there were two specific issues raised.

a) that shareholders may need to pay for nominee services ( I know free ones are available)

b) the potential loss of voting rights, company updates (and I presume shareholder perks).

I haven't looked recently but think that you can't attend ATMs etc with most nominees

If you look through the document in your link you'll see that it talks about voting shares and thinks that digitisation should be able to better facilitate it. In my experience this is already improving with nominee stockbrokers e.g., in the past week Trading212 - about as cheap a broker as you can get - sent me links to enable me to vote the shares of a couple of holdings I have with it.

Obtaining company updates is usually as easy as signing up to an email list on its website and brokers/nominees should inform you of important corporate events e.g., share consolidations, takeover offers.

You can attend AGMs, vote and obtain shareholder perks with shares held in a nominee but you often need to jump through a couple of hoops requiring engagement and responses from the broker that most people don't bother with. I don't think there are many left anyway but threads on here about signing up to Carnival's cruise discount perk when holding its shares via a nominee sounded very easy.

wmb194

gt94sss2 said:

I hadn't realised the way the BBC site had described it when I copied it into the original post.

On Moneybox, there were two specific issues raised.

a) that shareholders may need to pay for nominee services ( I know free ones are available)

b) the potential loss of voting rights, company updates (and I presume shareholder perks though some companies allow this).

I haven't looked recently but think that you can't attend ATMs or vote etc with most nominees.

There is also the fact that you become a beneficial owner in a nominee account and could be at risk of broker failure/FSCS compensation limits.

Then their are some other things which you can't really do with nominee accounts but can with paper certificates such as:

a) transferring ownership of shares without payment, both between family members; and

b) donating shares to a charity; 

The Aberdeen (abrdn) case study on engagement with its shareholders is a bit of an eye opener: essentially, it sees barely any engagement from the 900,000(!) shareholders* to whom it sent an AGM notice. Oh, and it costs £0.5m to post these to the people who insist on paper notifications or who haven't communicated a preference.

*No doubt a great many will relate to Standard Life's demutualisation in 2006.

GeoffTF

gt94sss2 said:

There is also the fact that you become a beneficial owner in a nominee account and could be at risk of broker failure/FSCS compensation limits.
...
b) donating shares to a charity;

Nominee accounts are not necessarily less safe. There are risks with certificates too. Investments have to be ring fenced and should not go missing. For investments, FSCS covers any LOSS that occurs nonetheless up to the £85K limit. If you have a big account, place it with a safe broker.

You can donate shares (and holdings in funds) to charity from a nominee account. The easiest way is to write to the charity telling them what you are planning to donate, and ask if they would like you to sell them and send them the proceeds. The charity then writes back and says yes. Your donation is then free of capital gains tax and gets tax relief. You have to be able to prove to HMRC that you intended to donate the proceeds before you sold the shares.