Welcome to the Coalition's Research Center!
How Stocks Are Traded
If you are interested in learning about how stocks are purchased, sold, and traded through the "street name" system, click here. The street name system in the United States facilitates the efficient processing of securities transactions by transferring shares among institutions on behalf of "beneficial owners," who are the underlying owners of the securities.
Shareholders who purchase common stock in a public company are able to vote on major decisions affecting the company. As a practical matter, many shareholders are not able to attend shareholder meetings and cast their vote in person. Therefore, these shareholders must vote by proxy.
How Stocks Are Voted
The U.S. Securities and Exchange Commission (SEC) has enacted rules and regulations regarding the proxy voting process. To learn more about how individual investors (i.e. beneficial owners) actually vote their shares, click here. This section of the website also will describe the role of Broadridge Financial Solutions, which is the primary provider of proxy administrative and processing services to brokers and banks. To help investors understand the role of broker voting, this section will explain New York Stock Exchange (NYSE) Rule 452 and the status of the NYSE proposal to modify this Rule.
How Stock Voting Can Be Influenced and Ownership Hidden
An investor who possesses equity shares generally has the right to vote the shares. But equity securities can be "borrowed" by third parties for trading purposes and these borrowers can vote at the annual meeting. An investor can borrow shares of a company just before a record date and then return the shares right after the record date, creating the right to vote the shares at a shareholder meeting without having any long-term economic interest in the company. This "empty voting" dilutes the power of shareholders who do have such an interest. (See "How Stocks Are Voted").
Furthermore, some borrowers are short sellers who want company stock prices to go down so they can profit from that price change; they do not seek long-term share price appreciation. The lending of equity securities to short sellers can harm shareholder interests by attracting votes from people who want the company to do poorly.
Another voting problem is created by the use of complex derivative products, such as cash-settled equity swaps, to gain an economic interest in the company, but keep it hidden from public view. This means the companies and their owners do not have a full picture of who owns the company. To learn more about how shareholder voting can be influenced through short selling and derivative transactions, click here.
Glossary of Terms
The terms used in this website can be complicated. To help investors and other users of the website become familiar with the language used to explain shareholder voting and communications issues, the Coalition has prepared a glossary of terms. Click here for the Glossary of Terms page.
Proxy Advisory Services
A related problem with the shareholder communications and voting system involves the role of proxy advisory services. These advisory services wield enormous influence in corporate elections, but they are not subject to any disclosure requirements or oversight with respect to their ability to control or influence the outcome of a vote. Some advisory services also have an inherent conflict of interest in the voting process because they also provide related consulting services, such as corporate governance ratings and advice, in addition to providing voting recommendations on shareholder proposals submitted by their clients. To learn more about this issue, click here for the Proxy Advisory Services page.
Click here for more information about how stocks are bought, sold, and traded.
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Some of the terminology on this website can get confusing. Please click here for a Glossary of Helpful Terminology.
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