One of our Members has responded to our previous note on voting your shares held in nominee accounts and in particular ISAs by saying that when he requested they submit votes on his Rolls-Royce shares the Idealing company said there would be a £30 administration charge for doing so. The ISA regulations make no provision for such a charge so I have advised that he should tell them this is illegal.
Below is the relevant part of the ISA Regulations which some brokers do not seem to be familiar with:
From the ISA Regulations pages 19/20 (see http://www.tisa.uk.com/regulations/84_ISARegs_2017.pdf
- (6)(c) that, in relation to a stocks and shares component, qualifying investments for an innovative finance component, a Lifetime ISA component and qualifying investments falling within sub-paragraph (h) of regulation 8(2), the account manager shall, if the account investor so elects, arrange for the account investor to receive a copy of the annual report and accounts issued to investors by every company, unit trust, open-ended investment company or other entity in which he has account investments;
- (6)(d) that, in relation to a stocks and shares component, qualifying investments for an innovative finance component, a Lifetime ISA component and qualifying investments falling within sub-paragraph (h) of regulation 8(2), the account manager shall be under an obligation (subject to any provisions made under any enactment and if the account investor so elects) to arrange for the account investor to be able –
(i) to attend any meetings of investors in companies, unit trusts, open-ended investment companies and other entities in which he has account investments,
(ii) to vote, and
(iii) to receive, in addition to the documents referred to in sub-paragraph (c), any other information issued to investors in such companies, unit trusts, open-ended investment companies and other entities;
You will also note that the first paragraph above actually enables you to request that you will be sent copies of Annual Reports from Companies which you hold within an ISA. By doing so you would of course know when to vote your shares. Again this is a little known provision which ISA operators like to ignore.
Roger Lawson
Why do you consider it illegal for the broker to charge for various shareholder services relating to holdings in an ISA? Isn’t that poor advice if the ISA rules do not prevent such service being chargeable? Obviously I’d like such services to be free, but wishing won’t make them so.
Well in my view, unless the Regulations say a charge can be made then it cannot. In any case some brokers clearly provide the service already without such a charge (for example the Share Centre), so why should Idealing do so? Making a charge for such services discourages shareholders from voting which is unjust. It’s like being asked to pay to vote in the General Election which has just been announced. Why should the Government not charge you to vote to recover their costs? There would be a public outcry if they did.
Roger Lawson
Not from the rules, but from the March 2017 Guidance Notes for Managers from HMRC (might also be in the rules – don’t know):
10.47 Managers may choose to charge the investor for services they perform while
managing an ISA.
• Fees related to the administration of the ISA, such as charges for opening,
maintaining or closing an ISA, or arranging for the investor to receive copies of
annual reports and accounts or to attend General Meetings, can be paid from
funds held outside the ISA, if the investor so wishes and the manager agrees.
• In the case of a flexible ISA (see paragraph 6.77), only sums withdrawn by the
investor can be replaced without counting towards the subscription limit.
Monies withdrawn by the ISA manager to cover fees and charges cannot be
replaced without the subscription counting towards the annual subscription limit.
• Charges related to the purchase and sale of ISA investments, such as dealing
commission charges, stamp duty, and the initial charge made by a unit trust
manager when purchasing units in a unit trust (or by the authorised corporate
director of an OEIC when purchasing units or shares in an OEIC), must be met
from funds within the ISA.
It is surely not arguable that this is covered by the general provision for being able to charge for services for “managing” an ISA because voting (i.e. exercising ones legal rights) is nothing to do with “management” of the ISA.
And the first sub-paragraph of 10.47 just allows charges that relate to ISAs to be put into non-ISA accounts. It does not give a general authority to impose charges. Plus it does not even mention voting.
I suggest that any broker who relied on this guidance from HMRC would be in the wrong because “Guidance” from HMRC is not the law. Unless you can find it in the “Regulations” that charges for voting are permitted, then I suggest they are not.
Roger Lawson
I agree that HMRC’s guidelines should not be considered final, but to challenge an ISA manager would require a ruling, and I’m not sure of who would provide a definitive ruling other than a court, and that would be costly. For me:
Broker A provides voting and LoR services included in a £100 annual fee.
Broker B charges £10 for either voting and LoR services, on top of a £200 +vat annual fee.
Broker C provides voting for free, but charges £100 per LoR, and has no annual fee.
So, all over the place!
You’re clearly using the wrong broker because I use none of A, B and C but get voting for free even in my nominee accounts. But even better I am a personal crest member also for my direct holdings and I always have at least a small direct holding in a company to ensure I can attend meetings, get all the notices, etc.
Roger Lawson