http://takingstockblog.wordpress.com/2010/07/27/wh
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Posted On: 12/19/2014 6:25:08 PM
http://takingstockblog.wordpress.com/2010/07/...ts-an-obo/
What’s An OBO?
In its recent Concept Release on proxy mechanics, the SEC asked for comment on, among other things, whether the OBO/NOBO mechanism should be changed. I thought it would be helpful to review the OBO/NOBO distinction, and how it affects companies who want to communicate directly with their investors.
Most shares of publicly traded stock in the US is held in “street name,” rather than an investor’s own name. Typically, a broker or bank (the “record owner”) holds the shares for the benefit of the investor (the “beneficial owner”). This system, which has been in place since the late 1960’s, allows brokers to process large numbers of transactions on a timely basis. But it means that companies who want to send information (such as proxy materials) to their investors must first send it to the record owners, who then forward the materials to the beneficial owners.
A company’s ability to communicate with its investors is further complicated by the OBO/NOBO distinction, which was put in place in the 1980’s. NOBOs, or “non-objecting beneficial owners,” are investorswho do not object to disclosure of information about their name, address and share position to the companies they have invested in. Investors who do not want their names disclosed are called OBOs. A recent SIFMA report suggests that most individual investors are NOBOs.
Companies can request a list of NOBOs from the banks or brokerage firms that are holding stock for their benefit. But they can’t get the names of their OBOs.
Many companies want to be able to communicate with their investors more directly. Recent changes to the proxy voting process limiting the utility of broker voting will only increase the pressure to reform the OBO/NOBO system.
What’s An OBO?
In its recent Concept Release on proxy mechanics, the SEC asked for comment on, among other things, whether the OBO/NOBO mechanism should be changed. I thought it would be helpful to review the OBO/NOBO distinction, and how it affects companies who want to communicate directly with their investors.
Most shares of publicly traded stock in the US is held in “street name,” rather than an investor’s own name. Typically, a broker or bank (the “record owner”) holds the shares for the benefit of the investor (the “beneficial owner”). This system, which has been in place since the late 1960’s, allows brokers to process large numbers of transactions on a timely basis. But it means that companies who want to send information (such as proxy materials) to their investors must first send it to the record owners, who then forward the materials to the beneficial owners.
A company’s ability to communicate with its investors is further complicated by the OBO/NOBO distinction, which was put in place in the 1980’s. NOBOs, or “non-objecting beneficial owners,” are investorswho do not object to disclosure of information about their name, address and share position to the companies they have invested in. Investors who do not want their names disclosed are called OBOs. A recent SIFMA report suggests that most individual investors are NOBOs.
Companies can request a list of NOBOs from the banks or brokerage firms that are holding stock for their benefit. But they can’t get the names of their OBOs.
Many companies want to be able to communicate with their investors more directly. Recent changes to the proxy voting process limiting the utility of broker voting will only increase the pressure to reform the OBO/NOBO system.
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