The Association of Investment Companies (AIC) has called for changes to company law to ensure platforms are required to exercise shareholders’ right to vote, following Herald Investment Trust’s recent vote on Saba Capital’s proposals to overthrow the trust’s board.
The AIC launched a campaign to ensure all investors are able to vote, called ‘My Share, My Vote’, in response to what it sees as ‘poor practices’ among some investment platforms and providers in the recent Herald general meeting.
The vote — which ultimately ended in defeat for Saba — sparked a huge turnout among shareholders, with a majority of the trust’s total shares with voting rights participating.
While major platforms have acted to keep customers informed, the AIC said, some failed to pass on voting rights and information, charge customers to vote, and decline to vote shares even when requested to do so.
Over the weekend, the Mail on Sunday revealed that Lloyds-owned platforms Scottish Widows, Embark and Stock Trader had not allowed investors to vote on the Herald proposals, though the bank has said that this has since been amended ahead of the next set of Saba votes at six other trusts.
The AIC has called on the government to make it mandatory for platforms to pass on company information and voting rights unless the customer opts out, by amending Part 9 of the Companies Act 2006.
The association also wants the government to ensure that where a customer does opt out, the nominee has a periodic requirement to confirm if this remains the customer’s preference, and allow any opted-out customer to opt in, on demand.
Richard Stone (pictured), AIC chief executive, said: “It’s simply unacceptable that investors find themselves left in the dark about their right to vote, prevented from voting or charged for the privilege. If we are serious about shareholder democracy, investors must be able to have their say.
“The large platforms have improved shareholder engagement significantly in recent years, and they have acted quickly in response to the Saba proposals. But we have to move beyond just relying on firms to do the right thing. We cannot have a situation where investors and their advisers are actively prevented from exercising their voting rights because the law allows their platform or service provider to choose not to pass on those rights.
“We are calling on the government to change the Companies Act so that nominees, including platforms, cannot avoid passing on voting rights and information to their customers. Now that investing takes place in a largely digital world, changing the law is essential for the health of our markets and to get more people engaged with their investments.”
An open letter outlining the issues was sent to business secretary Jonathan Reynolds.
Five of the remaining six trusts will vote on Saba’s proposals next week, starting with Baillie Gifford’s US Growth Trust and Keystone Positive Change on Monday (3 February).
This article first appeared on PA Future’s sister site Portfolio Adviser
