30 May 2022

Custodians on the share register


SALONI SURI, Shareholder Analytics


In a previous blog, we talked about the structure of the share register. Common accounts on a share register include Retail Investors, Company Directors and Management, and Custodial or Nominee accounts. In this blog we will take a closer look at Custodians.

Custodians’ accounts can be the most prominent shareholders on a share registry. They play an important role in satisfying legal and commercial requirements for professional investors, such as superannuation funds or mutual funds.

A key role is to hold investments in trust, to enable investment decisions to be made by the investment managers appointed by the beneficial holder, without needing to transfer ownership of the assets to that investment manager. Custodians also manage the time-consuming administration tasks associated with share ownership, providing significant efficiency benefits.

Custodial accounts are often incorrectly believed to be purely a tool to allow certain shareholders to disguise or hide their shareholding. However, this conclusion misunderstands the transparency available to discover underlying beneficial holders. Where strategic holders seek to avoid transparency of ownership this is generally achieved through broker lending or derivative accounts, which are not subject to the same disclosure obligations as custodial accounts.

It is often the case that a custodian holds shares on behalf of several beneficial holders. In addition, appointed investment managers often control the investment decisions of assets held in more than one custodial account. This matrix of ownership and decision making can often make it difficult for a company to immediately identify the beneficial owners and decision makers of its shares from the share register alone.

Different custodians cater to different types of investors. Custodians like HSBC, Citicorp, JPMorgan, UBS Nominees and BNP Paribas are commonly found on share registers and are typically used by institutional investors. The holdings of these Custodians are often large and are known for having layers of custodial or nominee accounts beneath them. While the end beneficial owners behind these nominees are typically institutions, it is also common for there to be retail investors who hold via ‘wrap’ or ‘platform’ accounts. A wrap account is an administration structure which enables a retail investor to hold their investments, including those held in superannuation, in an efficient and cost-effective manner.

There are some custodians, such as Macquarie Bank owned Bond Street, which are mostly retail oriented. Another common example of a retail focused custodian is Netwealth, which offers superannuation and investment wrap accounts. Wrap accounts are designed to save retail investors time and money. Charges are usually a flat fee on a quarterly or annal basis and cover all administrative, research, advisory and management expenses, including providing most of the information for tax returns in a single consolidated report.

A few custodial accounts like Brispot, New economy, Warbont are also used for temporary lending/collateral purposes. By virtue of the legal structure of their shareholdings and customer contracts, these parties can often avoid  disclosure of the counterparties to their agreements.

At FIRST Advisers, we specialise in identifying beneficial owners and investment decision makers behind these different types of custodial and nominee accounts and provide a breakdown on which of those parties exercises the voting rights. Our expertise in identifying the investors greatly benefits our clients’ investor relations and shareholder targeting, by facilitating a better understanding of the register composition by type, location and investment style, and also how these factors change over time.

30 March 2022

STOCK BORROWING AND LENDING 101


CHRIS HUGHES, Shareholder Analyst The borrowing and lending of shares dates back to the earliest days of stock trading. Put simply, it involves the owner of shares ‘lending’ them to another investor or institution who ‘borrows’ them for a given length of time. Borrowing and lending deals are often transacted by market makers or dealers, […]

Read More
28 October 2021

Why Intraday trading volumes may not impact a share register


SALONI SURI, Investor Relations Executive A common question asked by our clients is why they see more volume traded on market than captured in the investor tracking report over a period of time. Trading volumes and Underlying Beneficial Ownership Most of our clients experience large trading volumes on market but not all trading is reflected […]

Read More
31 May 2021

All you need to know about Short Selling


SALONI SURI, Investor Relations Executive. Overview Short selling is a simple concept—an investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender. In the period between selling borrowed stock and buying it back the investor is said to be ‘Short’ of stock, hence the term short […]

Read More
30 March 2021

Who’s really on your register?


IDENTIFYING THE BENEFICIAL OWNERS OF SHARES   ROWAN CLARKE, INVESTOR RELATIONS The ability to interrogate a company’s share register to identify its beneficial owners provides important information to Directors. In addition to identifying who is making decisions to buy and sell shares, it enables the Board and senior management to identify such things as where […]

Read More
30 June 2020

A new number 3 share registry


GILES RAFFERTY, Corporate Communications. An interview with Ben Kay, Executive Director, Automic At FIRST Advisers our shareholder analytics team works with all registries in the delivery of beneficial ownership analysis reports to our clients. We have watched the increasing penetration of Automic Group as a new player in the registry market in recent years and […]

Read More
2 October 2018

The Rising Tide of Passive Investment


Dan Jones, Shareholder Analytics and IR The popularity of passive investment amongst institutional and retail shareholders continues to grow and for good reason. Passive funds have outperformed active in each year since the GFC. The term ‘passive’, however, may well be misleading. While it does describe a manager’s approach to automated stock selection and investment, […]

Read More
10 April 2017

The Institutional Voting Process at AGM’s and the Value of Vote Tracking


Daniel Jones, Shareholder Analytics The Scenario We’ve all seen it; a company in the midst of a contentious voting situation at an AGM with management nervously waiting on the final proxy vote count. Less than 48 hours before proxy voting is due to close, a significant number of votes are lodged with the Share Registry […]

Read More
3 November 2016

The Activist – Pariah or Positive Catalyst for Change?


VICTORIA GEDDES, ECECUTIVE DIRECTOR The role played by the activist in the US capital markets has moved over the past 10-15 years from pariah to one of being a positive catalyst for change. Today proxy contests associated with nominations of independent directors for board seats are more likely to be won by activists than the […]

Read More
2 June 2016

Activist Investing Comes of Age


VICTORIA GEDDES, ECECUTIVE DIRECTOR In the past 5 years, post-GFC in particular, the activist investor has become firmly established as a recognised investor category within the funds management universe. Companies are starting to build into their investor relations strategy protocols that quickly elevate early signs of shareholder discontent up to the board. Politely acknowledging, but […]

Read More
11 February 2016

IR Managers: Think your firm has no peers? Think again!


I’ve heard it time and time again. “We cannot target investors based on a peer analysis because we… …have no peers …no direct peers” …no local peers” …no peers of the same size” To you that subscribe to this view I would like to challenge your definition of a peer. Whilst in your eyes a […]

Read More
30 November 2015

It’s Enough to Give Your CEO Nightmares


FIRST Advisers, Investor Tracking and Solicitation An unknown shareholder has doubled their shareholding in your company overnight but they can’t be identified because they are protected by privacy legislation in their offshore jurisdiction. Or suddenly one day that unassuming one per cent shareholding held in a prime broker intermediary account disappears and is replaced by […]

Read More
22 June 2015

The Right – and Wrong – Way to Target Investors


Ron Cameron, Senior Adviser, Investor Relations Public companies seeking to court new investors and build relations with existing ones will almost always be told by some register analysis providers that they should focus on targeting those investors with underweight or overweight positions in their stock, relative to a particular index. In other words, it’s those […]

Read More
2 December 2014

7 tips for Soliciting Shareholder Vote


In an age when the interactions between listed companies and their shareholders are increasingly automated and carried out electronically, the relatively low tech practice of soliciting votes still has a decisive role to play when companies need to win support from investors. The two strike rule at annual general meetings, increasingly bold activist investors and […]

Read More

Archives