Angus Rigby replies:
Nominee accounts can be a very convenient and secure way to hold shares electronically. But until recently, investors who held shares in nominee accounts could not enjoy many of the perks and rights enjoyed by investors who have direct shareholdings in companies.   

However, new legislation came into force in November 2007 that resulted in better access to investors who hold shares in nominee accounts. The Companies Act included a number of provisions to the benefit of nominee shareholders.

Shareholders using any broker’s nominee service now have the right to not only attend but also speak and vote at company meetings, and even enjoy the same discounts and perks that are available to direct investors.

Listed companies are also happy to send out annual reports and other information to existing and prospective investors. All you need to do is call the company’s head office.  Alternatively, you can often download reports and presentations from the company’s website.

While on the subject of nominee holdings, it is worth mentioning how your assets are protected in a nominee account. UK stockbrokers have to hold your shares in accordance with the FSA’s Client Asset Rules. Under these rules, customers’ shareholdings are held by separate legal entities who act as custodians of the shares and agree to ensure that the firm cannot utilise the assets. This means that, in the unlikely event of your broker going into liquidation, the firm’s outstanding creditors are not allowed access to client shareholdings to settle debts.

Therefore, it is difficult to envisage a situation whereby a customer would need to apply to the Financial Services Compensation Scheme to get compensation for a ‘lost’ shareholding (the FSCS guarantees 100 per cent of the first £30,000 of shareholdings and 90 per cent of the next £20,000) in the event of a protected claim that the firm
is not able to assist with.