Written evidence submitted by Mr Alan
Proposal that CPMA has power to supervise certain
activities of registrars acting for stock-market listed companies,
eg "rights issues", "open offers" and other
corporate actions, where any individual can be disadvantaged by
thousands of pounds, and that the Financial Ombudsman Service
has power to adjudicate in disputes between individual consumers
and registrar companies when invoked. Detail and reasoning is
attached with this email.
1. Contrary to general belief, activities of
company registrars are totally outsid the ambit of the FSA and
of FOS except to the extent that any actadditionally to
registrars' workas share brokers. One of the largest UK
registrar companies has told me that it has around 1,200 basic
staff, often heavily augmented by temporary staff, but that because
they subcontract all share-broking activities, only one employee,
with absence cover, is covered by FSA or FOS despite the great
play they make in publicity seeming to apply to all their activities
about being covered by the FSA and FOS.
2. Nearly every UK stock-exchange-limited
company subcontracts registrar activities. Whether the tiny proportion
of quoted companies handling their own such work might be exempted
from this proposal for CPMS and FOS supervision, or be supervised
under existing or amended company legislation could be discussed
3. All company registrars act in a quasi-judicial
and quasi-financial capacity, where any decision can disadvantage
an investor by thousands of pounds, yet there is no recourse except
through the courts, and for that the investor may have their procedures
and even evidence withheld by the alleged guilty party.
4. Every corporate action, eg "rights
issue" or "open offer", has a deadline date and
time for valid receipt of shareholders' election or instructions.
Each applicant is required normally to enclose a cheque with his
instructions, usually for some (or many) thousands of pounds,
for buying additional shares according to the terms of the "rights
issue", "open offer", etc. For each applying consumer,
it is crucial whether his/her application is deemed to have been
received before or after the publicised deadline. Rejection as
"received too late" is costly for each applicant, in
making available substantial money to meet their cheque additionally
to loss of desired investment opportunity.
5. There are million of such corporate action
nominations every year. Even a small proportion being wrong ascribed
as received "too late" is a large number involved very
large sums in total.
6. Consumers currently are seriously disadvantaged,
usually powerless, when their application is wrongly rejected.
Legal cases and other reliable documentary evidence have demonstrated
that even mailing instructions and cheque "Recorded"
or "Registered" delivery does not guarantee delivery,
nor registrars' correct processing, on on time. It is precisely
at these corporate action times that registrars require to recruit
large numbers of temporary staff, with additional risks of administrative
and processing problems and errors. Being outside FOS ambit, consumers'
only recourse if through the courts, ie further costs, substantial
7. Where the consumer undertakes legal action,
under present arrangements, procedures and even evidence can be
withheld by the alleged guilty part, blatantly unjust. Detail
in point 6 of "Recommendations" below.
1. That CPMA has power to supervise certain
activities of registrars acting for publicly listed companies,
eg "right issues", "open offers" and other
corporate actions, where any blameless individual can be disadvantaged
by thousands of pounds and that the Financial Ombudsman Service
has power to adjudicate in disputes between individual consumers
and registrar companies when involved.
2. Registrars, standard procedure is to
stamp each application with "Received too late" or similar
where that occurs. CPMA might decree such be applied by machine,
incorporating security against improper or unfair use, perhaps
evidencing date and time (or at least batch nunmber, etc) of stamping,
for settling subsequent queries or disputes. An independent observer
to verify this equipment is correctly set and working in each
relevant snap inspection. Current practice appears to be such
stamping by hand, without date or time, with no indpendent verification
whatever of when stamp applied, which can be backdated after the
consumer has complained about a genuinely-wrong rejection.
3. Given the quasi-judicial function of
registrats and that its outcome can affect any shareholder by
thousands of pounds, it is essential that at least one totally
independent skilled observer is enabled to certify correct allocation
of applications as "in time" or "too late".
That will require agreement well beforehand by such independent
observer that the registras' procedures, including staff supervision,
timing equipment, etc are sufficient and operational. Snap inspections
will be necessary during the period for receipt of applications,
also immediately before and after deadline, and subsequently.
More than one independent observer may be necessary, certainly
desirable to minimise building too friendly a relationahip between
observer and registrar staff and supervisiors. Appropriate observers,
suitably instructed, might be provided by staff of probity seconded
from eg london Stock Exchange, non-local off-duty (freelancing)
JPs, bodies like UKSA, APCIMS, TISA, IMA, Proshare and perhaps
CPMA, AITC, etc. Independent checks are necessary on possible
conflict of interest or loss of independence for each individuals
allocation to observing duty, Such bodies will welcome this demonstration
they are safeguarding the interests of the investing public, their
reason for existence in most instances.
4. CPMA to make compulsory under this regulatory
powers, or at least to stress in their code of practice, that
it is normal practice (as it is) that the name of directors be
given on letterheadings, etc each annotated with all or major
professional-body designatory letters to which each belongs, as
evidence of probity and specialist professional knowledge (to
top or lesser standards, to those able to assess such). This is
espeically important for directors ultimately responsible on legal,
financial and compliance matters. One might expect designatory
letters to appear at every opportunity, as excellent advertisement
for the firm and individual, yet some registrars appear to have
gone to unusual lengths to hide this information, presumab ly
to minimise risk of complaint ro professional bodies. All professional
bodies stress to all members the desirabilty of using their designatory
letters to the full. If for any good reason this recommendation
is not actioned for eg letterheadings, surely it must be mandatory
in at least one publicly-accessible source, eg annual Companies
House returns of directors' particulars, given the quasi-judicial
and quasi-financial nature of their work. Alternatively, the CPMA
could rule that the names and professional qualifications of directors
ultimately responsible for at least legal, financial and compliance
matters be stated, in standard paragraph format, in locations
they designate, eg letterheadings, brochures, websites.
5. CPMA to rule that registrars' standard
procedure on any corporate-action nominating shareholder complaint,
or request for verification of their application or instruction,
be checked and answered in appropriate detail unless there is
prima facie good reason not to. No longer admissible for
registrar to respond "We are professional and our systems
cannot make mistakes" or similar bland brush-of.
6. As with all financial organisations,
registrars' telephones initially caution callers that calls may
be recorded, etc. Where a complaining shareholder requests transcript
of a conversation, eg for use in a court case, or to verify whether
there are grounds for such a case, it is at present totally unclear
to complainant whether ther elevant conversation was recorded
or not, enabling refusal to supply the recording or its transcript,
claiming it never existed, where factual evidence in the conversation
is to the registrars' disadvantage. Since it is, at least currently,
impractical for most private UK shareholders to record all potentially-relevant
outgoing calls, this is an unsatisfactory position requiring improvement
by the CPMA, perhaps in co-operation with the Data Commissioner's
office. The public, not only shareholders, need transparency on
whether a call is recorded or not, with failsafe assumption it
is recorded if not otherwise stated, perhaps especially for calls
on direct lines to senior management, and where calls initially
answered on general customer lines are transferred to management.
7. Corrections to existing serious public
disadvantages are needed even if relevant powers are to be exercised
by any authority other than CPMA or FOS.
18 October 2010