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Online trading platforms – do I own the shares?
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Online trading platforms – do I own the shares?
If I buy shares using one of the online platforms (let’s say II, for example), do I own the shares, and are they registered in my name with the PLC? Or, am I putting my money into a bundle/virtual share (that's equivalent to the actual share if I try to cash it)?
If the former, if I decide to no longer use the online platform, can I still hold the shares, and sell them via a different platform at some point in the future?
And, essentially the same question, if the share is a bundle/virtual share.
Thanks
If the former, if I decide to no longer use the online platform, can I still hold the shares, and sell them via a different platform at some point in the future?
And, essentially the same question, if the share is a bundle/virtual share.
Thanks
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- Lemon Quarter
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Re: Online trading platforms – do I own the shares?
typonaut wrote:, do I own the shares, and are they registered in my name with the PLC? Or, am I putting my money into a bundle/virtual share (that's equivalent to the actual share if I try to cash it)?
You are the "beneficial" owner of the shares, but not on the PLC's register. Instead the shares are held (owned on your behalf) by a "nominee" who is supposed to represent you. That nominee will be a seperate entity from the platform, though it is possible that both entities may be owned by a holding company. For example I would expect that iWeb would use Halifax to provide nominee services.
There are advantages and disadvantages to this system. The government is a HUGE fan. So much so that you can't run a stocks and shares ISA or SIPP without using a nominee service.
https://www.oxfordreference.com/view/10 ... 3100237256
I've not tried to own shares without using a nominee (except when the nationalised industries were sold direct to the public) so can't comment upon if it is possible to do so without going down the share certificate route. I did have some shares in certificated form but "bed-n-breakfasted" them into an ISA many years ago.
Having your shares exist as paper certificates greatly increases the time and costs of trading, but means that you don't have to pay for someone to keep track of your portfolio for you.
You are on the register, so voting is easy. However you are on the register, meaning that boiler room scammers can contact you.
You are automatically posted the anual report, instead of having to download it yourself or asking for it to be emailed.
Last edited by Urbandreamer on February 3rd, 2021, 8:28 am, edited 1 time in total.
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- Lemon Slice
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Re: Online trading platforms – do I own the shares?
If it's a nominee account, which II, HL etc are, then you're the beneficial owner and I believe you do own the shares BUT the shares are all bundled up with everyone else's on the platform and they are not registered in your name. The shares should be real not virtual unless there's a fraud going on.
If you decide to no longer use the platform you have 2 options:
Withdraw the shares as certificates when they will be in your name (probably cost about 15 - £20 / share. You can deposit them for free with another nominee account when you want to sell them (this is the cheapest option for selling)
or
Get a CREST account where you will be the registered owner but it will cost £500 / year
There's probably more complexity around being a beneficial owner so I'm sure someone will add to this.
If you decide to no longer use the platform you have 2 options:
Withdraw the shares as certificates when they will be in your name (probably cost about 15 - £20 / share. You can deposit them for free with another nominee account when you want to sell them (this is the cheapest option for selling)
or
Get a CREST account where you will be the registered owner but it will cost £500 / year
There's probably more complexity around being a beneficial owner so I'm sure someone will add to this.
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- Lemon Half
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Re: Online trading platforms – do I own the shares?
If you have shares in a nominee account, it's often possible to transfer them "in specie" to the same type of account (ISA, SIPP or dealing) at a different provider, without having to cash them in or convert to certificates.
Scott.
Scott.
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- Lemon Quarter
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Re: Online trading platforms – do I own the shares?
As others have said the broker, eg Hargreaves Lansdowne, holds the shares as nominee for the beneficial owners but the PLC's share register does not record the ultimate beneficial owner. There will be one holding in, eg the BP share register, for HL representing the aggregate shareholdings in BP of all HL clients. That is separate from HL's assets so were HL to go bust, the nominee holding of BP shares is not at risk. The danger is that if, when the broker goes bust, the holding in the register does not equal the sum of the clients shareholdings in the brokers records, through fraud or whatever reason, there is a problem.
I used to have my largest holdings in certificated form, decades ago, partly for that reason.
The other advantages of certificated holdings are that you get company documents sent directly to you and can vote directly and attend meetings etc.
Dividends will go direct to your bank account and not be delayed by the brokers slowness.
There are no fees or costs which a broker might otherwise charge.
Obviously selling the shares is a bit more of a hassle but I would simply lodge the share certificate with my broker before selling.
There is a considerable risk in that if you post the certificate and it gets lost, you are in trouble and will need to pay for an indemnity to get a replacement certificate. That is one reason I chose a broker who had an office near my office so I could hand in certificates in person and not risk the post.
Eventually I decided certificates were too much hassle and went to a large reputable broker (HL) and put it all with their normal nominee service. It was the takeover of TD Direct that triggered this decision.
I used to have my largest holdings in certificated form, decades ago, partly for that reason.
The other advantages of certificated holdings are that you get company documents sent directly to you and can vote directly and attend meetings etc.
Dividends will go direct to your bank account and not be delayed by the brokers slowness.
There are no fees or costs which a broker might otherwise charge.
Obviously selling the shares is a bit more of a hassle but I would simply lodge the share certificate with my broker before selling.
There is a considerable risk in that if you post the certificate and it gets lost, you are in trouble and will need to pay for an indemnity to get a replacement certificate. That is one reason I chose a broker who had an office near my office so I could hand in certificates in person and not risk the post.
Eventually I decided certificates were too much hassle and went to a large reputable broker (HL) and put it all with their normal nominee service. It was the takeover of TD Direct that triggered this decision.
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Re: Online trading platforms – do I own the shares?
Thanks for the information. How does one find out who the nominee is for a particular platform?
I understand the concept of beneficial ownership, but I also understand the concept of fungibility – ie that a set of beneficial owners cannot tell which items are theirs if there happens to be a shortfall.
I take it you mean £15–20/company, rather than per share?
What’s to choose between:
(just the featured platforms here: uk. stockbrokers. com /guides/share-dealing-accounts (not allowed to post links!?))
And/or what platforms do you recommend (and why)?
I want to build a small portfolio of shares that I want to hold of the mid-long term (5+ years), I will not be making many trades (once set up, I doubt I make more than a couple of trades a year.
I understand the concept of beneficial ownership, but I also understand the concept of fungibility – ie that a set of beneficial owners cannot tell which items are theirs if there happens to be a shortfall.
doug2500:
Withdraw the shares as certificates when they will be in your name (probably cost about 15 - £20 / share).
I take it you mean £15–20/company, rather than per share?
What’s to choose between:
- IG,
Interactive Brokers,
Saxo,
Fineco,
Hargreaves Lansdown,
Interactive Investor and
DEGIRO
(just the featured platforms here: uk. stockbrokers. com /guides/share-dealing-accounts (not allowed to post links!?))
And/or what platforms do you recommend (and why)?
I want to build a small portfolio of shares that I want to hold of the mid-long term (5+ years), I will not be making many trades (once set up, I doubt I make more than a couple of trades a year.
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- Lemon Quarter
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Re: Online trading platforms – do I own the shares?
typonaut wrote:Thanks for the information. How does one find out who the nominee is for a particular platform?
No idea, and you should never need to know. The regulator is responsible for checking noninees and every instance of things going wrong that I know of entails the platform simply not depositing the shares with the nominee. Ie the fraud is there. I only guessed that iWeb would use Halifax, because they are owned by them and the fees might as well remain within the group.
typonaut wrote:doug2500:
Withdraw the shares as certificates when they will be in your name (probably cost about 15 - £20 / share).
I take it you mean £15–20/company, rather than per share?
Yes, but it could be more than £25 per holding.
typonaut wrote:What’s to choose between:IG,
Interactive Brokers,
Saxo,
Fineco,
Hargreaves Lansdown,
Interactive Investor and
DEGIRO
(just the featured platforms here: uk. stockbrokers. com /guides/share-dealing-accounts (not allowed to post links!?))
And/or what platforms do you recommend (and why)?
I want to build a small portfolio of shares that I want to hold of the mid-long term (5+ years), I will not be making many trades (once set up, I doubt I make more than a couple of trades a year.
No idea. Seriously, not a single idea. I use A J Bell, Eqi and Pilling & co. Each has it's own advantages and disadvantages. For example Pilling's is VERY expensive to deal, but far cheaper than HL to hold large unit trust holdings. A J Bell is cheap to deal but charges significantly to hold unit trusts, though not as much as HL. They also have charges when you access a SIPP, while Eqi charge a lot less than them for the same thing.
I haven't checked the brokers that you mention and certainly have no idea what charges would most effect you, ignoring quality of service.
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- Lemon Half
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Re: Online trading platforms – do I own the shares?
Urbandreamer wrote:A J Bell is cheap to deal but charges significantly to hold unit trusts, though not as much as HL. They also have charges when you access a SIPP
Not any more, as of 1st January 2021.
Scott.
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- Lemon Half
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Re: Online trading platforms – do I own the shares?
I just looked at the details of Halifax Sharedealing which says:
This from the Lloyds site, https://www.lloydsbank.com/investing/he ... ation.html
TJH
Stock - all customer stock held by us is registered into the name of a nominee company controlled by us. This is a non-trading company and the record of accounts clearly identifies those stocks as being held on behalf of customers.
This from the Lloyds site, https://www.lloydsbank.com/investing/he ... ation.html
TJH
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- Lemon Quarter
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Re: Online trading platforms – do I own the shares?
typonaut wrote:Thanks for the information. How does one find out who the nominee is for a particular platform?
This information should be in your contract with the broker and if it is not there or they don't want to tell you you should very much care!!
GS
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Re: Online trading platforms – do I own the shares?
iWeb use HSDL Nominees Ltd (same as Halifax).
Don't bother looking on Companies House for the accounts.
https://find-and-update.company-information.service.gov.uk/company/02249630/filing-history Oh go on then.
They are there but very boring and are effectively dull dormant/non-trading companies. As they ought to be.
Don't bother looking on Companies House for the accounts.
https://find-and-update.company-information.service.gov.uk/company/02249630/filing-history Oh go on then.
They are there but very boring and are effectively dull dormant/non-trading companies. As they ought to be.
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- Lemon Quarter
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Re: Online trading platforms – do I own the shares?
Also, a couple of other points to note:
1) (afaik) all nominee accounts will provide you with documentation to allow you to receive shareholder communications, shareholder benefits if the company has any, visit company AGMs and vote should you wish to.
2) A share certificate is not "proof of ownership". Shares are not bearer bonds. Rather, shares belong to the person listed on the company share register (or their nominee), NOT to the person who holds the certificate. I mention this because it is a common fraud, selling share certificates. So share certificates are not truly "real" physical shares either . More of an aide-memoir.
For infrequent traders who do not require access to unusual markets, consider iWeb or Halifax Sharedealing (same product, slightly different pricing). Cheapest access to the market from a huge established player.
Gryff
1) (afaik) all nominee accounts will provide you with documentation to allow you to receive shareholder communications, shareholder benefits if the company has any, visit company AGMs and vote should you wish to.
2) A share certificate is not "proof of ownership". Shares are not bearer bonds. Rather, shares belong to the person listed on the company share register (or their nominee), NOT to the person who holds the certificate. I mention this because it is a common fraud, selling share certificates. So share certificates are not truly "real" physical shares either . More of an aide-memoir.
For infrequent traders who do not require access to unusual markets, consider iWeb or Halifax Sharedealing (same product, slightly different pricing). Cheapest access to the market from a huge established player.
Gryff
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Re: Online trading platforms – do I own the shares?
gryffron wrote:Also, a couple of other points to note:
1) (afaik) all nominee accounts will provide you with documentation to allow you to receive shareholder communications, shareholder benefits if the company has any, visit company AGMs and vote should you wish to.
2) A share certificate is not "proof of ownership". Shares are not bearer bonds. Rather, shares belong to the person listed on the company share register (or their nominee), NOT to the person who holds the certificate. I mention this because it is a common fraud, selling share certificates. So share certificates are not truly "real" physical shares either . More of an aide-memoir.
For infrequent traders who do not require access to unusual markets, consider iWeb or Halifax Sharedealing (same product, slightly different pricing). Cheapest access to the market from a huge established player.
Gryff
I have not been a fan of the nominee system for a long time.
Too many things that can go wrong - but so far they have all been among very small players in the retail market.
One of my main reasons for using iWeb (other than price) is the fact it's owned by Lloyds.
If (and it's a big if) there was any fraud and the FSCS scheme didn't cover it all the loss, then I expect the political pressure on Lloyds to put it right would be massive and Lloyds Banking Group would fix it to avoid reputational damage.
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Re: Online trading platforms – do I own the shares?
typonaut wrote:Thanks for the information. How does one find out who the nominee is for a particular platform?
I understand the concept of beneficial ownership, but I also understand the concept of fungibility – ie that a set of beneficial owners cannot tell which items are theirs if there happens to be a shortfall.doug2500:
Withdraw the shares as certificates when they will be in your name (probably cost about 15 - £20 / share).
I take it you mean £15–20/company, rather than per share?
What’s to choose between:IG,
Interactive Brokers,
Saxo,
Fineco,
Hargreaves Lansdown,
Interactive Investor and
DEGIRO
(just the featured platforms here: uk. stockbrokers. com /guides/share-dealing-accounts (not allowed to post links!?))
And/or what platforms do you recommend (and why)?
I want to build a small portfolio of shares that I want to hold of the mid-long term (5+ years), I will not be making many trades (once set up, I doubt I make more than a couple of trades a year.
HSBC platform charges £10.50 a quarter for holdings and £10.50 for each trade.
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- The full Lemon
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Re: Online trading platforms – do I own the shares?
gryffron wrote:2) A share certificate is not "proof of ownership". Shares are not bearer bonds. Rather, shares belong to the person listed on the company share register (or their nominee), NOT to the person who holds the certificate. I mention this because it is a common fraud, selling share certificates. So share certificates are not truly "real" physical shares either . More of an aide-memoir.
Yes. Which makes all the more annoying the faff and cost if a share certificate gets lost. The registrar already has all your details and share listings which nowadays you can even access yourself online!
I had a returned certificate go missing once. I could easily log on and see them listed (albeit blocked for transactions, following my notice to the registrar - Crapita ). Didn't cost me or matter in the long run, as they were anyway eventually delisted.
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Re: Online trading platforms – do I own the shares?
absolutezero wrote:gryffron wrote:Also, a couple of other points to note:
1) (afaik) all nominee accounts will provide you with documentation to allow you to receive shareholder communications, shareholder benefits if the company has any, visit company AGMs and vote should you wish to.
2) A share certificate is not "proof of ownership". Shares are not bearer bonds. Rather, shares belong to the person listed on the company share register (or their nominee), NOT to the person who holds the certificate. I mention this because it is a common fraud, selling share certificates. So share certificates are not truly "real" physical shares either . More of an aide-memoir.
For infrequent traders who do not require access to unusual markets, consider iWeb or Halifax Sharedealing (same product, slightly different pricing). Cheapest access to the market from a huge established player.
I have not been a fan of the nominee system for a long time. Too many things that can go wrong - but so far they have all been among very small players in the retail market.
One of my main reasons for using iWeb (other than price) is the fact it's owned by Lloyds.
If (and it's a big if) there was any fraud and the FSCS scheme didn't cover it all the loss, then I expect the political pressure on Lloyds to put it right would be massive and Lloyds Banking Group would fix it to avoid reputational damage.
Hmm, I am not sure I would describe providers of nominee accounts as "very small players". For a start all ISA and SIPP accounts have to be nominee accounts as well as institutional pension funds. Do you not utilise such tax-preferred accounts for that reason alone?
As for relying on the government to bail out your brokerage account in an extreme failure, I am not sure I would. After all, Lehman Bros was one of the largest brokerage outfits on the planet and that was allowed to fail. In another financial crisis I am not sure that there will be a popular public movement to save people with six and seven figure brokerage accounts. Just ask clients in Iceland and Cyprus. You might find that any bailout will be individually capped.
What we really need is adequate protection such as the US has with SIPC. I still think its $500,000 protection per account is a bit mean, but it is way better than what the UK offers. Either way, if there is blood in the streets I am not sure that waving a share certificate in the air will help much; we will all be in trouble. It is rather like the people who say you should only own physical gold in case of a Mad Max scenario. Better carry a big gun as well.
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