The Australasian Investor Relations Association (AIRA) has called for greater transparency of retail shareholder rights when using investment facilitators (IFs).
IFs were investment service providers, many of which targeted first-time investors with low costs, that arranged transactions but did not carry out the purchases and sales themselves.
AIRA, which represents listed entities, commissioned Listcorp, a listed company and retail investor information platform, to produce a white paper which found that many retail shareholders involved with IFs were not getting the full share ownership experience.
It found that access to listed company operational information, meetings, further investment opportunities and other benefits may be forgone due to the structure of the IF, particularly in IFs that group client holdings together.
AIRA said this negatively impacted listed companies, limited their ability to communicate which affected long-term relationships and divided the level of information and reward across shareholders.
AIRA chief executive, Ian Matheson, said: “There have been instances of criticism towards companies where shareholders believed that they held direct share ownership and were not aware their IF was not providing the full shareholder ownership experience.
“They assumed that the information, access and opportunities were selectively coming from the companies but in fact it was the IF and it’s structure that stopped the flow”.
Listcorp chief executive, John Daly said: “While low-cost trading platforms, wealth management platforms, Separately Managed Accounts, etc. may provide innovative and valuable ways for retail investors to arrange and manage their shareholdings, they should also deliver those shareholders the full shareholder ownership experience.
“If not, they must ensure investors are consciously choosing a lesser experience with the benefit of clear, comprehensive and current information.”
AIRA called for IFs to be upfront and clearly provide investors with a statement confirming that clients will or will not receive the full share ownership experience, and if not, what investors may fall short of.
The group said it hoped to provide a better understanding to regulators, retail shareholders and listed entities on the issue and begin a conversation regarding upfront disclosure, as contemplated under the Corporations Act.
