Will Present Case to New Trump Administration

Alliance Advisors, a global corporate consulting and communications firm, has kicked off a campaign to change a 40-year-old Securities and Exchange Commission rule that allows large stockholders to remain anonymous to the companies that they are invested in, announced Joseph Caruso, the Alliance Advisors CEO.

Caruso argues that under current SEC rules, American public corporations and investment companies are at a serious disadvantage because corporate boards are shielded from the identity of some of their biggest stockholders.

The roadblock to investor transparency was established by the Securities and Exchange Commission in the mid-1980s. It allowed owners of company stock to be classified as either objecting beneficial owners (“OBOs”) or non-objecting beneficial owners (“NOBOs”). OBOs do not want their name, address, and direct share positions disclosed to the company’s management by the broker or intermediary who purchased the stock for them. NOBOs, on the other hand, do not object to such information being disclosed.

To change the regulations on shareholder ownership, Alliance Advisors created a group called the Shareholder Ownership Transparency Alliance (SOTA) whose goal is to convince Congress to eliminate the OBO classification and thus allow publicly traded companies equal access to all their shareholders. SOTA will present information on the failings of the OBO rule and a petition signed by corporate executives and shareholders from around the county who support the elimination of OBOs to the House Finance Committee when the new Congress convenes in 2025.

“At a time when every member of Congress and just about every federal and state regulatory agency is demanding more transparency from corporations – to the point where companies are counting the number of electrical vehicles in their parking lots – one of the most crucial corporate transparency issues is going unaddressed,” says Caruso.

“The present system of shareholder communication is cumbersome, time-consuming and costly and ultimately that cost is borne by the shareholders,” notes Caruso. “The NOBO and OBO rules were made when Ronald Reagan was president and were welcomed at that time. It’s now time to bring stock ownership into the 21st Century.”

Many of the OBO accounts are held by high net-worth individuals, hedge funds and foreign investors, who hide their identity and shield their positions from management. Their ability to mask their identity – and their ownership stake in a company gives OBOs an unfair advantage that is both costly and extremely disruptive to management teams who are working to run the business for the benefit of all stakeholders, explained Caruso.

“To pass complex shareholder proposals that benefit a company’s future, companies need to secure voting support from all their shareholders. Having an unidentifiable shareholder segment with a meaningful share position can cause havoc to the outcome of a shareholder meeting,” said Caruso, whose firm helps corporations solicit shareholder votes.

Caruso added that from his talks with hundreds of corporations about the OBO issue; “I doubt there is a single American corporate executive who would not support an update in shareholder rules that allows companies to talk directly to their biggest and most influential stockholders.”

Help For Small Companies

Caruso says the lack of shareholder transparency is a more acute issue for small, emerging companies since all public companies are forced to work primarily through one monopolistic, third-party company. This intermediary charges exorbitant, non-negotiable fees to send proxy vote materials to their investors.

“Major multinational corporations like Disney can afford the huge expense of secure lists of NOBO stockholders when they need votes for an important or contentious shareholder meeting. And they will spend millions of dollars to do it, which is a waste of the shareholders’ money,” says Caruso.

Caruso adds that making all shareholders transparent to corporate boards poses no danger to the investors. “All the companies want to do is talk to them; to explain the positions they are taking and why their support is needed for a certain proposal. None of the companies want to – nor should they be allowed – to sell their shareholder information,” said Caruso.

The Alliance Advisors’ CEO noted that corporate executives in Europe and Asia operate with much more transparency about who owns their companies. “Foreign companies have a distinct advantage both financially and strategically over American firms,” said Caruso. To help American companies succeed in global competition, the new administration in Washington needs to update a 40-year-old rule that is a hindrance to corporate communication.

Caruso said he believes, “success in this initiative will benefit both the corporations and small individual shareholders. It is the small shareholders who are hurt the most by these rules. There are no losers as a result of the change in policy that we are proposing.” Change in policy that we proposing.”

To learn more about the importance of erasing the OBO, and to support the elimination of the OBO secrecy, please go to https://sotanow.org/.

Contact:
W. Sam Chandoha
1-917-873-2949
schandoha@allianceadvisors.com