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NEWS COMPILED BY MARK PHILLIPS Marketers undermine shareholder privacy A government review into share register access has been told to clamp down on unscrupulous marketing activity. “Unfortunately, as the law now stands, companies have little option but to hand over highly personal shareholder details – even if they suspect the information will be used for improper purposes” SYDNEY: Privacy issues are back in the spotlight. Chartered Secretaries Australia (CSA) has just provided the Federal Government with confidential data which, it has claimed, clearly demonstrates that shareholder registers are primarily being sought by charities, brokers, investment companies, genealogical research companies and other self-interested parties, mainly for marketing purposes. To strengthen its call for legislative amendment to protect the privacy of retail shareholders, CSA has provided the Government with a letter from a charity which recently wrote to a number of large publicly listed companies, noting that it “wished to gain a greater understanding of the wealth holdings of the individuals on the register”. “Shareholders in a string of popular blue-chip companies – including ANZ, Westpac, BHP Billiton, Westfield and AMP – that were contacted by this charity and many other organisations like it are rightly distressed that their personal and financial information can be so easily plundered,” said CSA chief executive Tim Sheehy. CSA also told the Government that a big bank received 11 share register requests in the past two years, only one of which was a legitimate request from a shareholder. Alarmingly, the remainder were variously from a body offering to purchase shares at below market value, charities, investment companies and estate finders. “Unfortunately, as the law now stands, companies have little option but to hand over highly personal shareholder details – even if they suspect the information will be used for improper purposes,” Sheehy said. “Shareholder consent is not needed, and those third parties don’t even have to disclose what they will use the information for. “A request could be refused if a third party specifically admitted they wanted to use the register for marketing purposes, but most savvy marketers have worked out by now that, by saying nothing, they can get their hands on a very cheap mailing list and there is nothing a company or shareholders can do to stop them.” According to a poll of CSA members in ASX Top 100 companies, a staggering 95 per cent of requests for company share registers come not from shareholders but from third parties seeking to exploit the information for their own commercial activities. The finding confirms the dramatic increase in the number of requests for share registers from third parties since the Full Federal Court found in 2008 that a reasonable fee for a copy of a company’s share register was $250. Previously, share registry fees often in excess of $15,000 represented a significant practical barrier to inappropriate requests for shareholder information, Sheehy said. “The Corporations Act needs to be changed to include the same privacy protections for shareholders that exist for all other financial dealings and personal information,” he said. “Privacy laws currently prohibit the disclosure of someone’s bank account or superannuation account details, so it does not make sense that anyone can obtain a shareholder’s name, address and portfolio information simply because the shareholder chooses to invest in this manner.” CSA has urged the government to introduce a “proper purpose” test to rein in access to share registers. According to Sheehy, such a test would protect the privacy rights of shareholders and at the same time would not interfere with shareholders’ existing rights to use the register for the legitimate purposes of contacting other members in relation to the governance and management of the company. THE “PROPER PURPOSE” PROPOSAL • Specify that requests to access a register must be for a “proper purpose”; • Give clear guidance as to which purposes are “proper”; • Require access seekers to give their name and address and to state the purpose for which the information will be used; • Require access seekers to use the information only for the disclosed purpose and to return or destroy the information once that purpose is complete; • Specify that the company must comply or refer the request to an external dispute resolution body within 10 working days; and • Specify that if the company considers the request is not for a “proper purpose” it may apply to an external dispute resolution body not to release the register. 6 RISK August 2009
NEWS New deal for risk The popular television game show, Deal or No Deal?, has become the unlikely subject of serious risk analysis. MELBOURNE: In an innovative departure from the norm, a new study in the International Review of Finance used data from the popular television game show, Deal or No Deal?, to explore risk aversion and economic decision-making behaviours of individuals in a high-stakes setting. Apparently the setting of the game show provides an ideal condition for studying a range of issues relating to risk aversion. It begins with 26 suitcases of prizes ranging from 50 cents to $200,000, with most of the prize money amounting to $10,000 and below. The contestants are asked to select one suitcase to be set aside, and then asked to continue eliminating the rest of the suitcases by choosing between the offers made by the bank, or staking their chances on an unknown amount in any particular suitcase. The study, Deal or No Deal, That is the Question: The Impact of Increasing Stakes and Framing Effects on Decision- Making under Risk, examines the statistics from 102 episodes of the Australian version of the game show. Findings showed that while risk aversion increased with the stakes, people were generally willing to bear risks despite very high stakes. Researchers also found that males were more willing to take risk and less likely to be swayed by a positive counter offer. While gender and age are significant determinants of risk aversion, it found, wealth was not a factor when establishing a person’s risk behaviour. “The analysis of decisions under uncertainty is fundamental to modern economics and finance,” said co-author of the report, Professor Robert Faff, from the Department of Accounting and Finance at Monash University. “By studying contestant choices in Deal or No Deal? we were able to explore risk aversion in the context of both very high and wide-ranging pay-offs. It also allowed us to answer questions including heterogeneity and how this varies with demographic characteristics such as age, wealth and gender.” “Findings showed that while risk aversion increased with the stakes, people were generally willing to bear risks despite very high stakes” RISK August 2009 7
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