A Non-Objecting Beneficial Owner (NOBO) is a beneficial owner of a company who grants permission to a financial intermediary to disclose their name and address to companies or issuers of the securities they have acquired. This enables companies to directly contact these beneficial owners for various business communications, although the SEC stipulates that proxy materials should still be routed through an intermediary, usually a broker.
Key Takeaways
- Non-Objecting Beneficial Owners (NOBOs) consent to release their name and address to companies in which they hold securities.
- Objecting Beneficial Owners (OBOs) prefer to keep their information private from companies.
- Released information allows companies to communicate directly about voting proxies, financial reports, and other business-related materials.
- The SEC has detailed rules on how companies can interact with both objecting and non-objecting beneficial owners.
- Companies push for the removal of the distinction between beneficial owners, whereas banks, brokers, and OBOs typically support maintaining it.
Beneath the Surface: Who Are NOBOs?
A beneficial owner of a security is someone who has securities held by a financial intermediary, typically their broker or another financial intermediary they are associated with. An objecting beneficial owner (OBO) ensures their personal information is not disclosed to the company that issued the securities. Conversely, a non-objecting beneficial owner (NOBO) allows their details to be shared with the company.
When setting up an account with a broker, individuals usually get the choice of whether they want their information shared with the companies in which they buy shares.
Companies and issuers seek this personal information to contact shareholders regarding important shareholder communications such as proxies, circulars for rights offerings, and annual/quarterly reports. Since NOBOs allow their information to be released, they receive such communications directly.
The SEC defines both types of beneficial owners and sets rules on how companies can interact with them. While a broker is required to act as the intermediary for proxy information, other communications can be sent directly to NOBOs.
Weighing The Pros and Cons
Opinions among financial industry players about SEC rules on objecting and non-objecting beneficial owner statuses vary widely. Companies often argue against the distinction, believing direct communication would lower costs and enhance shareholder participation.
In contrast, banks and brokers are keen on maintaining the distinction to protect their customer lists, preserve income from forwarding proxy materials, and safeguard stock loan revenue.
Objecting Beneficial Owners (OBOs) also support maintaining the distinction, valuing their privacy and wanting to avoid unsolicited communications.
Related Terms: beneficial owner, financial intermediary, objecting beneficial owner, securities, broker.
