Unsatisfactory Avast AGM, and Designated Accounts

I “attended” the Avast (AVST) Annual General Meeting today. This was of course held on-line using Zoom with only one director in physical attendance (Warren Finegold) who chaired the meeting. Zoom seems to be becoming the de facto standard for on-line meetings.

The Chairman of the company, John Schwarz, gave a brief presentation backed up by some slides. To summarise, it was another strong year of growth and profitability. A new CEO is now in place. EBITDA was up 8% with strong cash generation and hence there was a steady reduction in debt. They added 400,000 paying customers making a new total of 12.6 million. There were numerous new product releases and dividends are up 8.1%.

But nobody could raise questions at the meeting. In addition, although shareholders could submit questions in advance, these were not answered at the meeting. Overall this was a totally unsatisfactory way of conducting an on-line AGM.

Votes were taken on a poll to be declared later, but the proxy counts were quickly flashed on the screen. I noticed Belinda Richards managed to get 13.7% of the independent shareholder votes against her. I wonder why.

The whole meeting was over in 15 minutes.

Apparently customers of The Share Centre have been notified that there are new terms and conditions which cover the future use of designated nominee accounts. This will be a major step forward in investor protection and shareholder enfranchisement. Most brokers, like the Share Centre, use only “pooled” nominee accounts where your holdings are jumbled up with those of all their other customers. It relies on the brokers sorting out who owns what, which can sometimes prove to be not at all easy if a broker gets into financial difficulties. Designated accounts contain both the broker and end customer identification on the share register and hence are by far preferable.

It will be interesting to see how they support such accounts, and whether it will be affected by the proposed merger with Interactive Investor. This was approved by a vote on the 8th April but there has been no further news.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Law Commission Error on Segregated Accounts

In a previous blog post on the Law Commission’s consultation on Intermediated Securities I queried their claim that all investors in nominee accounts had the option to use a segregated account (i.e. a “designated account” where your name is on the share register, not just the nominee operator’s). They claim this is mandated by an EU regulation. This is extremely important because a simple “pooled” nominee account that most stockbrokers use does not give you clear ownership of the shares. If the broker goes bust and has not properly recorded who owns what (as is often the case), you may have difficulty recovering your shares. It also means that the company you own shares in cannot communicate with you and neither can anyone else.

HAVING YOUR NAME AND CONTACT DETAILS ON THE SHARE REGISTER IS EXTREMELY IMPORTANT!

I have now actually looked into the true position with three different stockbrokers I use for ISA and SIPP accounts. This is what they said (in summary, edited for brevity):

  1. We are planning to offer segregated accounts and we expect this to be available mid-next year.
  2. We are working on implementing this with the expectation it will be an option for account holders next year, but it will be considerably more expensive than our current fees.
  3. These requirements come into effect as soon as the CSD, in our case Euroclear, receives its authorisation from the regulator Bank of England as a CSD – this is expected to be Q1-2020. We will offer segregated accounts when obliged to do so. Charges will be materially higher than for a pooled nominee account given the additional processing and operational costs involved.

In summary therefore, they concede it is legally required but they are not rushing to implement it and they will be deterring people from using that option by high and unjustified charges. In essence this is disgraceful.

I will be making this plain to the Law Commission.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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