Share Register Data Restrictions Impacting the Market,

Jacques de Bie, IRSSA [May 2022]

Shareholder ownership data and analysis is an important tool for IROs and senior managers of listed companies for several reasons. It identifies who the major fund managers and beneficial owners of the company actually are and it can identify trends in buying and selling patterns in the stock and/or the sector. This is a basic requirement for IROs to ensure effective engage with shareholders and for targeting shareholders in roadshows and capital raises amongst many other purposes.

Prior to the enactment of the POPI Act, ‘public vendor files’ [share registers]’ were available at a basic cost from STRATE. These ‘public’ files enabled analysis of listed issuers’ registers other than the IRO’s own register. Since POPI was implemented in July ’21, STRATE now withholds these data-files and they are not available to the market for analysis.

In essence, The SA Companies Act says – issuers must make their registers accessible/available to shareholders in that register for inspection, thus promoting the principle of ‘transparency of share ownership’ in the market. POPI Act says – receivers (issuers, service providers etc) can only use this data if permission is granted by the ‘data owner’ and only for the purposes of what the data owner allows it to be used for. This contradiction has caused STRATE to adopt a ‘conservative’ position and simply to restrict this public data set from the market. Many analysts and firms have asked STRATE, the newly established Information Regulator and the FSCA to determine if these restrictions are indeed valid and if they are indeed compliant with the SA Companies Act, as they seem too restrictive and contrary to the principle of transparency of share ownership in our market.

Initial indications were that clarity would be provided by regulators in Feb ’22 however this is still pending and no clarity has been provided by any of these regulatory authorities.

Divyesh Dajee, Head of Register Analytics at Singular Systems said: “The net effect seems intuitively to be a backwards step for the market and by comparison with the Shareholder Rights Directive II & the Anti-Money Laundering Directive (AMLD) implemented in Europe in 2020 to improve transparency of issuers, investors and intermediaries across the region. Transparency is needed to preserve trust in the integrity of shareholder transactions for the issuer and the market as a whole. “

In essence a segment of the market has been cut off from all users/stakeholders.

The unintended consequences of restricted register data and lower transparency in ownership could:

  1. Limit growth of retail investors who follow institutional fund manager’s investment trends and the major investment houses;
  2. Limit the detection of stealth [predatory] stake-building (The Takeover Regulation Panel’s rules around disclosure thresholds remain opaque as the onus is on the investor to inform the company at increments of 5% thresholds only) and by implication minority protections; and
  3. Preclude investigative research into ‘ethical investing and/or social injustices’ would remain unobservable by those organisations that do this kind of investigative work.

All these processes are currently impacted, as without public data-sets these would not be possible to achieve. The Information Regulator and/or the FSCA have been asked to clarify, what can and should be done in the interests of the market as a whole.