Respondent
...
6 December 2024
Beneficial Ownership and Transparency Unit
Market Conduct and Digital Division
The Treasury
Parkes ACT
Email: beneficialownership@treasury.gov.au
Dear Manager,
Thank you for the opportunity to make a submission on the Exposure Draft of the Treasury
Laws Amendment Bill 2024: Enhanced Disclosure of Ownership of Listed Entities. Ownership
Matters (OM), formed in 2011, is an Australian owned governance advisory firm serving institutional investors. This submission represents the views of OM and not those of its clients.
OM is broadly supportive of the proposed amendments to improve the beneficial ownership disclosure regime for listed entities as well as the proposed enhancements relating to market disclosure of derivative based interests. We propose to address one consultation question only and make general comments about the proposed enhancements to the beneficial ownership register.
Consultation Question 5: While it appears that the draft Bill does attribute the bought position through the categories of “relatable derivative-based holding percentage”, “deemed physically settleable derivative-based holding percentage”, “deemed non-physical settleable derivative based holding percentage”, market participants would benefit from full disclosure of the underlying derivative contract information.
As drafted, proposed section 671BA requires “details of any relevant agreement through which the person would have a relevant interest in voting shares/interest in the Chapter 6C body”.
Current market practice is for a disclosing shareholder to provide detailed information about the derivative transaction in an annexure to the substantial shareholder notice which enables market participants to identify the contractual terms, including pricing
(consideration) and settlement timing, that apply to derivative holdings.
ASIC could require such information be provided as the Bill removes the requirement that substantial holding notices be given in the prescribed form, and instead, allows ASIC to approve the manner and form in which the notices must be given. We think it is imperative that there is precision around the price and whether, at the time of the disclosure, the derivative is backed by physical stock.
Keeping, and access to, registers more generally: The draft Bill states that “the register must be in the form (if any) approved in writing by ASIC for the purposes of this paragraph”
(subsection 672DA(6)). It is important that the approved “form” that is approved by ASIC is www.ownershipmatters.com.au AFSL: 423168
a consolidated register of beneficial owners derived from section 672A disclosure notices.
Without consolidation the register has limited utility for inspection purposes.
Presently a member of a company that inspects a register can be presented with an assortment of paper copies of responses to tracing notices (over differing date ranges) in non-standard formats with naming conventions that are impossible to decipher. This is in no way shape or form, a beneficial ownership register.
Companies spend considerable amounts of shareholder money employing third parties
(such as Orient Capital, Nasdaq and Georgeson) to consolidate these tracing notices
(frequently on a monthly basis) into a usable format so that the company can decipher who owns and controls the shareholdings on its register. If reports such as these have been collated then (in addition to inspecting the actual tracing notices contemplated by Section
672) – these consolidated reports should be available for inspection, by other members of the company.
Part of Parliament’s intention behind the Section 672 is that a register which identifies beneficial owners will be available to all members of the company, to facilitate communication between them in the event (for example) that a vote is required to remove underperforming directors. Presently only an incumbent board and management has access to this type of consolidated report that has been compiled at shareholder expense.
The current provisions of the Act function well to force custodians (at minimal expense) to make available a register of tracing notices so that a small industry of third parties can prepare “Beneficial Ownership Analysis” for companies, primarily to assist its investor relations and marketing functions. A small tweak will ensure that this information is also available to shareholders, for the purpose that Parliament intended.
Additionally, as noted in our response to The Treasury’s consultation paper on Multinational tax integrity: public beneficial ownership register dated 16 December 2022, OM also supports requiring beneficial ownership information obtained by a listed entity through tracing notices to be held in a separate, independently run location, such as a register maintained by a body such as ASIC or the ATO. This would address the current situation where management teams are able to use shareholder funds to identify and potentially penalise shareholders disagreeing with management but then make it difficult for parties other than company insiders to access this information. This beneficial ownership information, subject to reasonable privacy protections and materiality thresholds – for example, holdings below a specified ownership threshold such as 1% - would be valuable to investors and those that serve investors by allowing them to conduct their own review of beneficial ownership information. www.ownershipmatters.com.au AFSL: 423168
Inspection of tracing notice register: The draft Bill requires listed entities to allow “journalists” and “academics” to inspect the register free of charge. In publicly traded markets, it is not clear why such access ought to be limited to “journalists” and “academics” when all market participants, including potential investors who are not members, would benefit from the ability to inspect the register free of charge.
Please feel free to contact us concerning any aspect of our submission. For the avoidance of doubt we are happy for our submission to be made public.
Yours sincerely,
Dean Paatsch & Martin Lawrence
Ownership Matters Pty Ltd www.ownershipmatters.com.au AFSL: 423168
