What Is a Non-Objecting Beneficial Owner (NOBO)?
Let me explain what a non-objecting beneficial owner, or NOBO, really is. As a beneficial owner of a company, if you give permission to your financial intermediary to release your name and address to the companies or issuers where you've bought securities, you're a NOBO. This setup lets those companies contact you directly with various business-related communications. That said, the SEC insists that for proxy materials, you should still be contacted through an intermediary like your broker.
Key Takeaways
- Non-Objecting Beneficial Owners (NOBOs) elect to release their name and address to companies in which they have bought securities.
- An objecting beneficial owner (OBO) chooses not to release their information to companies.
- The information released allows for companies to send information, such as voting proxies, financial reports, and other materials pertaining to the business.
- The SEC has outlined a variety of rules in how companies can interact with objecting and non-objecting beneficial owners.
- Certain parties, such as companies, are interested in abolishing the distinction between beneficial owners, where banks, brokers, and OBOs wish to keep the distinction.
Understanding a Non-Objecting Beneficial Owner (NOBO)
You need to understand that a beneficial owner of a security is someone who has that security held by a financial intermediary, usually your broker or sometimes another one you're connected with. If you're an objecting beneficial owner (OBO), you tell that intermediary not to share your name and personal info with the company that issued the securities. But as a non-objecting beneficial owner (NOBO), you agree to let that information go to the company. When you set up your account with a broker, you'll often get to choose whether you want your info released to the companies where you buy shares.
Companies and issuers want this personal information so they can reach out to you about important shareholder stuff, like proxies, circulars for rights offerings, and annual or quarterly reports. If you're a NOBO, you'll get these items directly because you've allowed your info to be shared.
The Securities and Exchange Commission (SEC) defines both types of beneficial owners and sets specific rules on how companies can deal with each. For instance, the SEC requires that a broker acts as the go-between for any proxy info sent to a NOBO, though other information can go straight to you.
Arguments For and Against a Non-Objecting Beneficial Owner (NOBO)
Different players in the financial industry have their own reasons to support or push back against the SEC's rules on objecting and non-objecting beneficial owners. Companies argue against the distinction and say they should be able to send communications directly to all shareholders without barriers. They figure this would cut costs and get shareholders more involved in the company.
On the flip side, banks and brokers want to keep the distinction in place. They're keen on keeping their customer lists private, holding onto the fee income from forwarding proxy materials, and safeguarding their stock loan revenue.
Naturally, objecting beneficial owners (OBOs) also want to maintain this setup. You, as an OBO, would prefer to keep your holdings and financial strategies private and steer clear of unwanted solicitations or spam.
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