Notification of shareholders for a company meeting is a more complex and time consuming endeavor than it may appear.
The shares in the DTCC (Depository Trust Clearing Corporation) system are held by many different shareholders. These shareholders consist of two types: “NOBO” (Non-Objecting Beneficial Owners) and “OBO” (Objecting Beneficial Owners). “Objecting” or “Non-Objecting” refers to whether or not the shareholder wishes for the issuer to know if they own the issuer’s stock.
Regardless of whether Transhare or the issuer notifies the shareholders of a shareholder meeting, a NOBO list will need to be obtained and an “OBO count” will need to be tabulated in order to assure proper notification of ALL common shareholders.
For those of you who are unaware of what becomes of a physical stock certificate when it is deposited with a brokerage firm the following describes the process.
When shareholders deposit their physical stock certificates at their respective brokerage firms these certificates are put into “street name” by transferring them from the shareholder name to the name of the brokerage firm or clearing firm. When the investor opens a brokerage account he indicates whether he wants to be a NOBO shareholder (known to the Issuer) or OBO shareholder (hidden from the Issuer). The brokerage firm (or the majority of them) then deposit the certificates into the DTCC system. The reason for this is to streamline the transfer process and accommodate the 3 day settlement process. When investors buy and sell shares of a public company in the open market, the shares are added and subtracted from the brokerage firm account through the DTC system.
If an account for the issuer has been established with ADP (The NOBO/OBO List provider), TranShare can normally obtain the NOBO list in about a week. Establishing an issuer account with ADP and requesting the lists takes a bit longer.
Upon receipt of the NOBO list from ADP, TranShare will check it for duplicate names and addresses against the issuer’s shareholder list and mail the meeting documents directly to the NOBO shareholders.
The OBO list is sent to Transhare a few days after we receive the NOBO List. The OBO list identifies those brokerage firms who represent objecting beneficial owners (OBO’s). ADP via the OBO List requests a specific number of proxy material packages such as shareholder meeting notification documents based on the number of OBO’s the brokerage firms have indicated they represent. TranShare sends the packages to ADP and ADP distributes them to the brokerage firms who, in turn, distribute them to their OBO investors.
This process usually takes several weeks, therefore, Transhare suggests that issuers give us as much advance notice of shareholder meetings as possible when they enlist our services in obtaining these lists.
