Andres Knobel ■ New publication on beneficial ownership transparency for companies listed on the stock exchange
This new paper describes why beneficial ownership regulations shouldn’t exempt companies listed on a stock exchange. Securities’ disclosure regulations are not adequate for identifying beneficial owners. In addition, definitions are subject to loopholes that affect identifying all relevant end-investors.
As assessed by the Tax Justice Network’s Financial Secrecy Index and summarised by our paper on the 2020 State of Play of Beneficial Ownership Registration, more than 81 jurisdictions have approved laws requiring beneficial ownership to be registered with a government authority. However, many legal frameworks (including the EU Anti-Money Laundering Directive) exempt listed companies from the scope of beneficial ownership registration, based on what we consider to be a wrong interpretation of the Financial Action Task Force recommendations.
The exemption benefitting listed companies is usually based on the fact that some other regulator, eg the securities or financial regulator or the stock exchange, is supposed to already have that information. However, this brief looks at securities regulations available in some countries, eg the US and the UK, showing that securities regulation doesn’t necessarily cover beneficial ownership information.
In the case of the US, the Securities Exchange Commission (SEC) has form 13D which is even called “beneficial ownership report”. However, it doesn’t necessarily refer to a natural person (which is the key element of the beneficial ownership concept according to the Financial Action Task Force and the OECD’s Global Forum).
Other countries, eg Ecuador, India and the Philippines do cover natural persons when requiring listed companies to identify their beneficial owners. Nevertheless, thresholds are too high to be able to identify all relevant investors.
This brief explains why we need a comprehensive approach to beneficial ownership registration to ensure that all legal vehicles, including those involved in passive investments, are subject to proper transparency. The brief also proposes measures to address the challenges, including our previous paper on the secrecy that surrounds listed companies and investment funds.
Download the brief here.
If you have comments or other proposals on how to address these secrecy risks, please contact Andres Knobel at [email protected]
30 uses for beneficial ownership (beyond anti-money laundering)
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14 November 2023