Subject: UK Digitisation Task Force - Interim Report

Subject:  UK Digitisation Task Force - Interim Report

Dear Sir Douglas:

We The Investors  (“WTI”) appreciates the opportunity to comment on the Digitisation Taskforce’s proposals to digitize the UK shareholder framework.

As a starting point, WTI strongly supports the dematerialisation of share certificates. There is no reason to continue to rely on an antiquated paper-based trading, settlement, and record keeping system. The Taskforce is right to explore new approaches to use technological advances to improve transparency and efficiency.

WTI is particularly supportive of proposed Model Four, which would completely change the current securities holding and settlement infrastructure, in favour of the use of Distributed Ledger Technology (“DLT”).
However, WTI remains very concerned about the Taskforce’s proposal to transfer legal ownership of securities to a Central Securities Depository (“CSD”) managed by the UK government. In response, we offer the following points in opposition to a centralised nominee system for trading, settlement, and record keeping of shares in the UK:

●	The current system of directly registering shares on a company’s stock ledger—often referred to as the Direct Registration System (“DRS”)—is transparent, efficient, and a best practice within the global securities industry. There is no reason to change direct registration of shares in order to implement an initiative to dematerialise share certificates.
●	Once a directly registered shareholder becomes a “beneficial owner,” the nominee is then registered on the stock ledger as the legal owner of the shares for voting and other administrative purposes. There is no compelling reason to require individual shareholders to forfeit their legal title to shares, especially when the technology exists to permit the direct registration of shares within a framework in which all shares are digitised.

●	A system of intermediation that replaces the direct registration system will only increase the costs of trading, voting, and record keeping of shares. These costs will eventually be borne by the same shareholders who are being asked to forfeit their voting and other legal rights in favour of a nominee.

●	The use of a Central Securities Depository, as the Taskforce has proposed, will raise a number of shareholder privacy and cybersecurity issues.  Consolidating data for all shareholders into a single government repository will require the development of numerous and costly safeguards and protocols regarding how information is accessed.  Any data breach or ransomware attack involving the Central Depository would also have extraordinary and far-reaching impacts on shareholders in UK companies.  Past experiences with cybersecurity incidents within existing UK government databases are prime examples of the risks and vulnerabilities that would be involved in establishing a government-controlled central depository system.

●	Finally, the use of a government-operated nominee system will create new challenges in tracking and settling share transactions, permitting the concealment of short selling activities and difficulties in detecting naked short selling. There is no reason to replace the current direct registration system with a centralised system that will allow intermediaries to engage in trading abuses by treating shares as a fungible mass.

For all these reasons, WTI encourages the Taskforce to move forward with its digitisation initiative without changing the direct registration of shares on the stock ledgers of UK public companies. Existing technology will permit shares to be digitised and also directly registered, and there is no compelling reason to establish a cumbersome and expensive nominee system managed by the UK government.

We The Investors appreciates the opportunity to provide comments on the Interim Report of the UK Digitisation Task Force. Thank you for considering our comments and we would be happy to answer any question or further explain any of the points contained herein.

Sincerely,

[APE]