Investment platform welcomes scoping paper, but highlights ‘elephant in the room’

Interactive investor has responded to a scoping paper by the Law Commission – ‘Intermediated securities: who owns your shares?’ – calling for further action on retail shareholder rights.

The Manchester-based operation is the UK’s number one flat fee investment platform with around £36bn of assets under administration, and the UK’s second largest direct to consumer (D2C) investment platform.

In its response to the scoping paper, interactive investor said there is no question that UK plc is being propped up by retail investors but, more often than not, they have been left out in the cold, particularly through the disapplication of pre-emption rights that has been prevalent across the many emergency fundraisings in 2020.

It said voting is another important area where retail investors are not getting their voices heard.

The publication of the scoping paper today lays out recommendations which aim to level up the playing field for retail investors.

Interactive investor is supportive of the Commission’s intentions and said research for the Law Commission suggests there is a mismatch between the sort of voice private investors want to have at the boardroom table of UK PLC, and what they actually get.

Richard Wilson, interactive investor chief executive, said: “We welcome the work by the Law Commission on retail shareholder rights.

“It shines a light on a key issue that interactive investor has been leading on as we shape the UK financial system for the future.

“We think much of the Law Commission’s work has merit and look forward to working together to ensure that the voice of our customers is heard.”

But he added: “We are disappointed, though, that they missed the elephant in the room.

“The scandal of ‘pre-emption’ allowing public companies to take retail investors’ money then rob them via rights issues is a blight on our financial system.

“We scorn corrupt countries for this, but we are teaching it. Appalling.”

Moira O’Neill, head of personal finance, interactive investor, said: “While pooled funds have been deliberately omitted from the paper, by virtue of the fact they are not companies in their own right, we would have liked to see the investment trust sector mentioned.

“Retail investors account for around a third of the trust industry’s shareholder base and so they have an important role to play when it comes to voting – and our customers are huge fans.”

Illustrating the need for action, interactive investor polled 1,101 of website visitors on behalf of the Law Commission and found 62% say they rarely vote at AGMs, if ever.

This clashes with the fact that most (53%) said they would be interested in voting on all shareholder resolutions, with executive pay highest on the agenda for 22% of customers.

As talk of action on ESG issues grows, interactive investor also found 25% of customers were primarily interested in voting on resolutions about corporate governance and on environmental or social issues.

Just over a fifth of customers (21%) said they voted on company resolutions at least sometimes, and only six per cent say they always do.

Almost a third of respondents (30%) said that they would, in fact, be more likely to invest in a company if they felt they could affect the way it is run through exercising their right to vote.

Commenting on the ii research for the Law Commission, Prof Sarah Green, commercial and common law commissioner at the Law Commission, said: “It is clear that some investors wish to enjoy the benefits of share ownership, including voting on shareholder resolutions.

“But not all investors who wish to vote are able to do so. The reforms we have suggested would help ensure that the system of holding investments through an intermediated securities chain works for everyone.”