Many beneficial ownership registration frameworks fail to obtain beneficial ownership information from listed companies for two main reasons. Either high thresholds in the definition (based on percentage of ownership or voting rights) prevent the identifying of any beneficial owners, or listed companies are directly exempted from registering beneficial owners because they supposedly already disclose ownership information to the stock exchange or securities regulator. However, this brief explains why disclosures required by securities laws fall short of registering and disclosing beneficial owners. They have different goals and definitions. Thus, listed companies should not be exempted from beneficial ownership registration, and appropriate thresholds should apply to the beneficial ownership definition of listed companies so that all relevant people (investors) are registered.
Key recommendations
- All types of legal vehicles, including limited partnerships and trusts, should be subject to beneficial ownership registration in a centralised register.
- Ideally for all types of legal vehicles, but especially for listed companies and investment funds, any individual directly or indirectly holding at least one share should be required to be identified and publicly registered. If thresholds are to be applied, they should not be based on percentages, but on economic interests, eg anyone who invested or holds interests worth at least $1,000 in a listed company or investment fund, or who has any voting rights or rights to receive dividends.
- Given that beneficial ownership needs to be updated, but that in the case of listed companies and investment funds there may be multiple trades per day, the identity of the end-investor beneficial owners could be determined as of the end of business each day. The paper proposes a process for this.
- Given that no single intermediary may hold beneficial ownership information on every end-investor and in relation to every financial asset, authorities should centralise this information and require every relevant intermediary to report the information they hold (or to request it from the intermediary above them) until the full picture can be determined (of which end-investor indirectly holds each share or unit from a listed company or investment fund).