Response to the interim report issued by the UK Digitisation Taskforce

In response to the call for industry feedback on the interim report issued by the UK Digitisation Taskforce (Taskforce) and led by Sir Douglas Flint, we have set out a series of recommendations focused around the key principles that should be worked through in advance of the Taskforce’s final report.

We welcome the interim report, in particular the focus on long-overdue reforms for creating a modern share ownership infrastructure that will bolster the global competitiveness of the UK as a world-leading international financial centre. In our response, we acknowledge the importance of implementing these reforms in a way that safeguards shareholder rights, fosters better engagement between shareholders and listed issuers, and is cost-effective for both issuers and shareholders.

Key points:

  1. Reform to the share registry system should be in an open architecture that promotes competition and builds on the UK’s strengths as an innovator in Open Banking, dovetailing with forthcoming developments in financial data exchange and digital ID. 
  2. Dematerialisation and digitisation should preserve the efficiencies that are present in the UK’s securities holding model, including the use of omnibus nominee accounts, while leveraging technology to achieve permissioned transparency of ultimate beneficial ownership where possible.  
  3. Simplicity will be key; we do not want a scenario where six different shares once dematerialised result in six different portals and passwords as this will be challenging for those who are less experienced with new technologies.  
  4. Setting out market-entry criteria and other contractual requirements and deliverables for each nominee is vital. 
  5. The Government should lead a public communication campaign to support retail investors and small businesses in the digitisation process, with close collaboration between public authorities and financial sector firms and issuers with touchpoints with these stakeholder groups. 
  6. The opportunity to modernise the UK’s approach in this area should not be lost and the Digitisation Taskforce should gather data on the costs (actual or perceived) of maintaining the status quo.
  7. Certainty related to the end goal will enable the industry to begin investment in a dematerialisation transition and the envisioned modernised architecture.
  8. Any adopted model ought to be appropriately attentive to shareholder rights, in particular those of retail certificated holders whose formal position as ‘name-on-register’ shareholders may change.  In the next phase of the consultation, it will be important to understand in detail the substantive rights that retail shareholders wish to exercise under a new system, and how those can best be facilitated in the context of modernisation. 

We believe these are the principles that should be followed to achieve the required reforms and that they can be achieved through the Taskforce’s preferred model. Granularity (in particular, identifying any primary and secondary statutory changes necessary) is an important next step.

Read our full response here.