Dematerialisation Glossary

Central securities depository or CSD
An organisation that operates an electronic system or the recording and settlement of uncertificated securities.

Companies Act
UK Companies Act 2006 (as amended).

Corporate sponsored nominee or CSN
A corporate sponsored nominee or CSN is a way for retail shareholders to hold shares electronically. It works by removing investors names from the main register and holding them together with other investors in a nominee company. A separate register of underlying individual investors is maintained by the nominee.

CREST
The central securities depository in the United Kingdom.

Custody
The process by which a financial institution holds securities on behalf of a client and assumes responsibility for their safekeeping and administration.

Dematerialisation / dematerialised
The issue of securities by companies without paper certificates to evidence title or the transformation of existing paper, certificated securities into electronic form. A dematerialised security is represented by an entry in an electronic register.

Digitised share register
A digital version of the register of required to be kept by section 113 of the Companies Act. The Digitisation Taskforce proposals envisage that members who hold shares in paper form on the implementation date would have their certificated holdings automatically converted to the digital register. This digitised share register would be maintained alongside the “operator record” which
records shares in the company held through CREST.

DRIP or dividend reinvestment plan
A plan under which shareholders can elect to receive shares instead of receiving a cash dividend.

ECCTA 2023 
The Economic Crime and Corporate Transparency Act 2023

FCA 
UK Financial Conduct Authority

FSMA
Financial Services and Markets Act 2000

GDPR
Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (United Kingdom General Data Protection Regulation), as it forms part of UK law by virtue of section 3 of the European Union (Withdrawal) Act 2018.

Interim Report
The interim report of the Digitisation Taskforce published on 10 July 2023.

Interim recommendations
The recommendations contained in the Interim Report, which are superseded by the recommendations in the Final Report.

Intermediary
An individual or, more commonly, an organisation which holds an interest in investment securities on trust for another, who may be another intermediary or the ultimate investor.

Intermediated securities chain
Interests in investment securities which are held by participants through a chain of intermediaries.

Investment securities
Instruments issued by a company in order to raise money, which include shares.

ISO 20022
A multi part International Standard prepared by ISO Technical Committee TC68 Financial Services. It describes a common platform for the development of messages.

Issuer
The company which issues the investment securities, in this case shares.

KYC
Know Your Customer checks which are required before taking on new clients; for intermediaries this means validating a client’s name, address and date of birth, checking for “politically exposed persons” and sanctions screening.

Nominee
An entity or individual that holds shares on behalf of the beneficial owner of the shares. They are the registered owner of the shares but they do not have any rights or obligations as shareholders.

Overseas branch register
A register of members permitted to be kept pursuant to s.129 Companies Act for members resident in certain countries and territories listed in s. 129 Companies Act.

Register of members
A register of all the shareholders in a company, which is required to be kept by section 113 of the Companies Act. It comprises two parts: the “issuer record” or “certificated register” which includes members who hold securities in paper form; and the “operator record” which includes members who hold securities through CREST.

Retail investor
An individual who purchases investment securities such as shares in a non- professional capacity.

Section 793 of the Companies Act
Part 22 of the Companies Act provides UK public companies with a mechanism for obtaining information about interests in their shares.

Broadly, a UK public company may issue a notice pursuant to section 793 (a “section 793 notice”) to any person whom the company knows or has reasonable cause to believe to be interested in the company’s shares (or being so interested at any time in the preceding three years).

The section 793 notice would require the recipient to confirm their interest and provide certain information regarding its interest in those shares. A recipient failing to comply with a section 793 notice could become subject to civil and criminal sanctions – for example, the company may apply for a court order imposing transfer or voting restrictions on the relevant shares.

Shareholders of the company holding at least 10 per cent. of the voting rights have the power to require the company to issue a section 793 notice. The company is also required to keep a register of interests disclosed through section 793 notices and that register must be kept available for inspection.

In addition to Part 22 of the Companies Act, other requirements relating to the identification of beneficial ownership in companies include:

• Part 21A and Schedule 1A to the Companies Act requires certain companies and LLPs to produce, keep and maintain a dedicated register of people with significant control over that company (a PSC register); and
• Part 1 of the Economic Crime (Transparency and Enforcement) Act 2022 provides for the creation and maintenance of a register of overseas entities by Companies House and contains requirements for overseas entities owning UK property to apply for registration and provide information about their beneficial owners.

Shares
Investment securities which give the legal owner of the security (the “shareholder”) an equity stake in the company.

Shareholder Rights Directive II or SRD II
Directive (EU) 2017/828, which amended the existing EU Shareholder Rights Directive (2007/36/EC) to further encourage long-term shareholder engagement and increase transparency.

Ultimate beneficial owner or UBO
The person with the ultimate beneficial interest in investment securities, at the end of an intermediated securities chain. An ultimate investor may be an individual, an institution holding securities on its own behalf, or a fund which manages investments on behalf of individuals or corporate bodies.