Electronic Participation in Shareholder
Development of an Independent
Shareholder Verification Process
In the course of the Shareholder Forum’s
special project for identifying practices to support information
exchanges associated with shareholder meetings, we confirmed in a
demonstration test yesterday that current technologies can be used to
conduct online verifications of an investor’s beneficial stock ownership.
The Forum is therefore proceeding with the development of an independent
shareholder verification service that can be made available to any company
or its administrator of shareholder records.
Requirements of verification in electronic investor communications
The ability to verify shareholder status is one of the key issues
addressed in the recent SEC initiative to address “proxy plumbing” reform,
and is a critical requirement of effective investor communications –
electronic or otherwise. Verification of current ownership of stock is a
condition of many shareholder rights, including requesting information
from a company and submitting proposals.
It can also be important for corporate managers as well as for other
investors to know the status of someone presenting comments or questions,
especially if the source is anonymous.
Verification requirements were considered especially challenging in the
context of electronic communications. The brokerage account statements
typically provided to verify ownership in written or in-person
communications could theoretically be used also in electronic form, but
the complexity of the process would detract from the convenience and
accessibility of electronic communication. The solution we developed for a
simpler, more efficient process was to make use of the online records
accessible through the "Open Financial Exchange" ("OFX"), a protocol used
by 5,500 financial service firms for online banking and account
management. With an investor’s permission as part of a log-in process, we
are now able to conduct a fully automated, rigorously secure review of the
broker’s current records – essentially the same as if a printed copy of
that day’s account statement had been presented in written communications
– and immediately report the verification.
Inviting advice to guide development of process applications
The Forum is committed to making the verification process available as an
independently controlled service that
can be readily adapted to a broad range of company and
transfer agent requirements for their verifications of beneficial
assures the privacy rights of investors who request
ownership verification, and
provides competitively efficient and reliable support for
the investor communications on which capital markets depend.
Any Forum participants interested in helping to guide our design of the
service, including its features and policies, are encouraged to offer
comments and suggestions.
GL – September 14, 2010
Chairman, The Shareholder Forum
c/o Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022