Allowing nominee registration not the objective of current legislation – gap between aims and application
Nominee registration of securities has recently been a topical issue. Public discussions have also assessed the current legislation as to whether it enables nominee registration for a Finnish person. The Financial Supervisory Authority has also reviewed the issue. Due to international developments, there is a gap between legislative aims and application possibilities.
The aim of the legislation on nominee registration of securities is clear: to prevent nominee registration of shareholdings in Finnish companies by Finnish persons and companies. This has been realised in the related Act so that, when the owner of a book-entry security is a foreign person or a foreign entity, the nominee registration custodian can be entered, instead of the owner, in the list of shareholders in the central securities depository. By implication, in the case of a Finnish owner, a nominee registration custodian cannot be entered in the shareholder list. Entries are made by the account operator or the central securities depository.
The origins of the Act are in the 1990s, when securities trading and custody was predominantly national. However, the situation has changed. Today, share trading and custody is international, and European regulation enables cross-border provision of share trading services. Therefore, order chains – and correspondingly custody chains – are often international and sometimes quite lengthy. Finnish regulation does not apply to foreign custodians, which operate within the scope of their national legislation, and nominee registration of securities in an omnibus account is an established practice in most European countries.
On the other hand, the Act on nominee registration includes provisions on the party to be entered in the list of shareholders and does not apply directly to shareholders. Thus it is not clear by virtue of which legislative act authorities can address possible nominee registration abroad by Finnish shareholders, even though the aim of the current law is clear.
For further information, please contact
- Jarmo Parkkonen, Head of Supervision of Markets and Conduct of Business, tel. +35810 831 5255