ShareSoc Comments on the Kay Review Recommendations

PRESS RELEASE 31 (23/07/2012)

ShareSoc welcomes many of the recommendations published today in the Kay Review of Equity Markets. Much of the analysis of the existing defects in the operation of the market and the returns obtained by investors is undoubtedly sound.

We particularly applaud Recommendation 17 which says “The Government should explore the most cost effective means for individual investors to hold shares directly on an electronic register”. One of the key elements of our manifesto is that individual shareholders should be properly enfranchised and not be forced into nominee accounts which are fundamentally unsafe and which cause shareholders to lose their voting and information rights. We have campaigned long and hard on this very issue which is one of the major defects in the UK stock market (for example our e-petition on the subject for those who have not yet signed it is here: http://epetitions.direct.gov.uk/petitions/16769 ).

We hope the Government will take up this recommendation as soon as possible, despite the opposition that will no doubt arise from existing vested interests to keep the status quo.Professor Kay has many helpful suggestions in addition to his seventeen main recommendations. We will be commenting more fully on the report at a later date, but here are a few initial thoughts.

We welcome the emphasis on improved “stewardship”. However the practical implementation of an “investors’ forum” looks exceedingly difficult to achieve. It may simply become another “club” for a few major institutions when the diversity and size of institutional investors in UK companies is enormous (and that’s not even taking account of private shareholders). How are representatives to be selected for this forum and are its discussions going to be public or private? Will it create “insiders” and how can it hope to tackle the enormous number and range of issues that arise in public companies? There are many unanswered questions here. ShareSoc did suggest an alternative approach based on “shareholder committees” as used in Sweden but that has not been taken up.
The more extensive and open disclosure of costs (Recommendation 8) is surely a long overdue reform. Many people have come to realise that costs have grown too high in the UK market with excessive “intermediation” which is obviously a focus of Prof. Kay’s work.
We also support his comments on directors’ and asset managers’ remuneration with a focus on long term performance, and rewards in a form other than cash.
We welcome the suggestion that the legal concept of fiduciary duty should be applied more widely (indeed we would like to see it applied to company directors).
Although Prof Kay suggests that asset managers should have more “concentrated” portfolios so as to provide more incentives to engagement, we are not clear how this could be enforced. Prof Kay seems to be against compulsion in all aspects of his report from his comments when presenting the report today.
It is disappointing to note the focus on large FTSE companies with little apparent attention paid to the needs or problems of smaller companies. We would have preferred to see this area covered in more than a trivial fashion although it seems that at 40,000 words the report is already longer than Prof Kay intended it should be.

In conclusion, this would appear to be the first step in possibly a rather long process to bring these recommendations into effect. We would like to see some urgency attached to many of these proposals so as to maintain the momentum for significant reform of company governance and market operation in the UK.

The Final Report of the Kay Review can be found here: www.bis.gov.uk/kayreview ShareSoc’s submissions to the Kay Review are present here: www.sharesoc.org/ShareSoc%20Kay%20Review%20Response.pdf and here: www.sharesoc.org/ShareSoc%20Kay%20Review%20Response%202.pdf

For further information, please contact:

Roger W. Lawson,
Chairman,
ShareSoc Telephone: 020-8467-2686
Email: info@sharesoc.org

Note any members of the press who wish to receive a complimentary copy of our informative monthly newsletter should send a request to info@sharesoc.org . Our newsletters cover not just the affairs of our organisation but contain general financial news and commentary. An example of our past newsletters is available on our web site. You can also follow ShareSoc on Twitter from @ShareSocUK.

About the UK Individual Shareholders Society (ShareSoc)

ShareSoc represents and supports individual investors who invest in the UK stock markets (and who own as much as 30% of the shares in UK public companies in aggregate). We are a mutual association controlled by our members with “not-for-profit” articles and incorporated as a company limited by guarantee. The organisation is financed by member subscriptions, donations from supporters and by the services it provides to members. Associate Membership of ShareSoc is free and is open to everyone with an interest in stock market investment. More information on ShareSoc can be obtained from our web site at www.sharesoc.org .

Post Date: July 23, 2012

Group description:	SIGnet Taunton is a new group with around 10 keen members at present, with a range of investment styles and experience. We welcome new members.
Meeting Type/Venue:	In person meetings at a golf club near to the centre of Taunton.
Meeting Frequency/Timing:	We meet on the first Monday of every month at a golf club near to the centre of Taunton, 11am until 3pm with a lunch break.

Group description:	An online group for those who are new to investing, or have only been investing for a few years. Including topics such as: – What is a share or a bond, why and how to buy them. – Comparing funds, unit trusts, Investment trusts and exchange traded funds. – Portfolio management and diversification. – ISAs, pensions, SIPPS and how to save tax. – How terms such as PE ratio and dividend yield are used to value a share. – How to use technical analysis or charting.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Monday of the month at 7:00pm.

Group description:	An online group for those who already have some experience in investing. Covering topics such as finding companies to invest in, financial statements and ratios, valuation / margin of safety, analysis of companies and investment trusts and exchange traded funds.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Wednesday of the month at 7:00pm.

Group description:	The Equity Income Group welcomes investors of all levels of experience, from beginners to advanced. The focus of meetings is on dividend paying Investment Trusts, though there is also discussion around individual shares.
Meeting Type/Venue:	Meetings are held online.
Meeting Frequency/Timing:	Meetings are held every 6 weeks on a weekday between 7 and 8:30pm.

Group description:	The Group welcomes investors of all levels of experience, from beginners to advanced. The focus of meetings is on all types of income generating financial instruments, from stocks through Trusts and Funds and ETFs to retail bonds. Meetings involve presentations from members, who are also expected to lead discussions from time to time, as well as discussions on what has been bought and sold since the last meeting.
Meeting Type/Venue:	Meetings are in-person in a venue in Central London.
Meeting Frequency/Timing:	Meetings are usually held on the last Thursday of every other month, starting with an informal lunch around 1pm followed by discussions until around 5pm.

Group description:	A welcoming group open to all types of investors. Typical meeting content is to have a deep dive presentation on a topic selected by the participants and a session on buy/ sell/ key lessons learnt last month.
Meeting Type/Venue:	In person at a friendly pub close to Piccadilly Circus
Meeting Frequency/Timing:	Monthly during the evening on the first Wednesday of the month.

Group description:	Our group is a broad church that contains investors of varying experience. Our members’ backgrounds are diverse and include corporate banking, engineering, teaching and the leisure industry. We generally pick a discussion topic for every meeting, e.g. housebuilders or the defence industry, and members are invited to research and discuss different aspects or companies within that industry. We also discuss stocks and investment trusts that we have bought, sold or are interested in and the reasons behind our decisions, and try to make sense of the ever changing investment environment. Discussions are robust and challenging but we are a friendly and approachable group who welcome investors of all levels – we just ask that you contribute, at whatever level you can.
Meeting Type/Venue:	Our meetings are held in a private room at a nice pub near to South Ealing tube station (Piccadilly Line), not far from Ealing Broadway (District, Central and Elizabeth Line).
Meeting Frequency/Timing:	We meet every 2 months, usually on a Wednesday morning at 11am.

Group description:	All levels of experience welcome. A typical meeting agenda includes: – Macro Environment – Trades: Members review existing positions and identify securities with promising TA entry patterns or setups and with suitable risk/reward. Any security, long, short, futures, options may be considered. The convener takes actual positions in trades and maintains his own detailed ledger, accurately measuring performance of individual securities and cumulative activity. Members are notified by e-mail prior to the entries or exits that are decided upon. Following each meeting an updated copy of the ledger is circulated together with the next meeting agenda. Members may wish to maintain similar ledgers of their own but there is no obligation to do so. – Technical Analysis: Techniques and systems used in trades. Members can request discussion of particular aspects of TA.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	The first Tuesday of every month from 7 to 9pm

Group description:	Open to all investors / people with an interest in investing. Typical meeting will involve members talking about recent purchases, successes, failures and possible future purchases. Also with occasional visiting speakers or members making presentations on a topic of interest.
Meeting Type/Venue:	We aim to meet on the last Tuesday of each month in a private room at a pub in Playhatch. Start time 7pm with members encouraged to meet up around 6pm for a bite to eat / drink before hand, if their diaries allow.
Meeting Frequency/Timing:	7pm on the last Tuesday of the month. Meetings likely to last about two hours but with informal ‘overspill’ before / after.

ShareSoc Comments on the Kay Review Recommendations

PRESS RELEASE 31 (23/07/2012)

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