ISE proposes to end paper share certificates

Paper share certificates may shortly be consigned to history by the Irish Stock Exchange. The exchange intends to switch to a purely electronic format in a move it says will cut costs and increase the speed of trading.

A dematerialisation implementation group established by the exchange in January yesterday published a report proposing the elimination of paper-based trading in Dublin.

The exchange said the move to electronic trading would not reduce the rights of individual shareholders.

About 80,000 investors in the Dublin market currently have holdings in paper certificate form. Most are relatively small shareholders and many are elderly.

Under the consultation paper proposal, share certificates and the Crest transfer form would be replaced by a shareholder statement and a shareholder registration number.

Each shareholder would receive a separate statement of their holdings in individual companies. The associated registration number would be used by shareholders looking to transact business in their shares.

"There is a growing realisation that a system using paper share certificates is outdated and inefficient compared to a fully electronic means of holding and settling shares," said Brian Healy, director of trading and regulation at the Irish Stock Exchange and the chairman of the dematerialisation group.

The group included representatives from listed companies, stockbrokers, custodians, Crest Co, share registrars, the Irish Financial Services Regulatory Authority, the Department of Enterprise, Trade and Employment and the exchange.

"It is important to emphasise that the proposal to dematerialise will not disenfranchise shareholders in any way. Shareholders who currently hold certificated shares will retain their current rights," said Mr Healy.

This means that, unlike electronic nominee accounts, shareholders will continue to receive information such as dividends, annual reports and all notifications and proxies directly from the company in which they have invested.

The report from the dematerialisation implementation group says a move to electronic trading only would facilitate the ease and speed with which investors can trade their stocks.

The exchange is seeking comments on the proposal by October 21st.