Law Commission opens consultation on intermediated securities

The Law Commission has published a call for evidence on intermediated securities, the first step in a scoping study, and asked stakeholders for their views and experiences.

With the intention of informing public debate and to develop
a broader understanding of options for reform, the scoping study focuses on the
issues of corporate governance and transparency.

According to the Commission, “there is also uncertainty as
to the legal redress available to investors in certain situations”.

Of the near 30 questions included in the Law Commission’s publication, there are a handful, highlighted below, which are a key consideration for stakeholders.

The first asks whether it is difficult for ultimate
investors to exercise their voting rights. If the respondent believes it is,
the Commission seeks examples or specific evidence of difficulties ultimate
investors have experienced in doing so.

If the respondents consider the exercising voting rights to
be a problem, the Commission wants to know what they think could be done to
solve these problems

“Are there particular systems or models of holding
intermediated securities which could better facilitate the passing back of
direct rights for ultimate investors?” it asked, and if so, can the respondent
point to the current obstacles to using them.

The Law Commission is also probing whether the type of vote
affects the extent to which ultimate investors can exercise voting rights.
Additionally, it wants to ask investors if they find it difficult to ascertain
whether their votes have been received and counted and what the impact might
be.

Finally, the Commission wants to hear from investors about the
practicalities around the timing of votes and whether this affects their
ability to make their voices heard.

With all the points raised by the Commission, it is seeking
solutions to any potential problems unearthed and is asking investors for their
ideas.

The call for evidence is open until 5 November 2019 and can be accessed via the Commission's website. The responses from consultees will be analysed and used to inform the scoping study which will be published in autumn 2020.