Jun. 25, 2023
This rule doesn't appear to be something that will help resolve issues in our markets. Only investors who hold their shares directly should be beneficial owners. Derivatives holders are potential stockholders for the duration of their contracts, but there is never a REQUIREMENT for a derivatives holder to hold even a single share directly in their name. Because of that, they can NEVER be beneficial owners. They are not holders, they have nothing until they exercise their right to have something. This is particularly important when considering company shareholder voting. To vote, you must be a beneficial owner of shares. If company A's shares cost 20 dollars a share then a shareholder must pay 20 dollars to vote during company shareholder meetings. A derivatives contract can be purchased for a fraction of that price and, under this rule change, be just as good as holding shares in name? Why would you want to make it cheaper for potential shareholders to control corporate voting outcomes over actual shareholders? I believe doing that would be a terrible direction for our markets. If I hold the entire float of a company on the US stock market in my portfolio, derivatives can still be sold for that stock without my permission. There would be a 0% chance for any person buying a derivative to EVER own one of my stocks as, in this scenario, I would not be selling. How can you ever reasonably argue that the derivative holder is a 'beneficial owner'? Should they get to vote over me? Why do they get a say at all if I can prove I own the entire float of a company in my name through Direct Registration (DRS)? Where do they get their shares from if they exercise their contracts? The shares which do not exist, can not exist, and will never exist? I hope you can clearly see now how much of a mistake this rule change will be. Best, Christopher Sills