Title: What Is a Non-Objecting Beneficial Owner (NOBO)? — A Practical Guide for Investors and Issuers
Key takeaways
– A NOBO is a beneficial owner who permits the broker or other financial intermediary holding their securities to release the owner’s name and address to the issuing company.
– NOBO status enables companies to contact shareholders directly for communications such as annual reports, rights offerings, and other shareholder mailings.
– The Securities and Exchange Commission (SEC) still requires that proxy materials be provided via the intermediary even for NOBOs; other communications may be sent directly.
– Investors typically choose NOBO for direct receipt of issuer information; OBO (objecting beneficial owner) preserves privacy and routing through the broker.
– Choosing NOBO vs OBO has trade-offs: direct information and potential engagement vs reduced privacy and possible solicitation.
What is a NOBO (plain-language definition)
A non-objecting beneficial owner (NOBO) is an owner of securities whose shares are held “in street name” by a broker or another financial intermediary, and who has given that intermediary permission to disclose the owner’s name and address to the issuing company. This contrasts with an objecting beneficial owner (OBO), who instructs the intermediary not to release their identity.
How NOBO status works (the mechanics)
– Street-name holding: Most retail investors’ securities are registered in the name of their broker or the broker’s nominee (not in the investor’s personal name) for operational efficiency. The investor is the “beneficial owner.”
– Intermediary role: The broker or transfer agent maintains the record of which beneficial owners are associated with the intermediary’s shares.
– NOBO consent: At account opening (or later), the investor can elect to allow the intermediary to release their contact details to issuers. If they agree, they are a NOBO. If they decline, they are an OBO.
– Communications: Issuers use NOBO lists to mail non‑proxy communications (annual reports, rights offering circulars, shareholder outreach). Proxy materials, however, are generally disseminated through the intermediary per SEC rules.
NOBO vs OBO — quick comparison
– NOBO: issuer can receive name/address and mail certain materials directly; more direct engagement; possible solicitations.
– OBO: issuer does not receive personal contact details; all communications go through broker; greater privacy and reduced direct solicitations.
Why NOBO/OBO status matters
For investors:
– Receipt of issuer information: NOBOs receive issuer mailings directly and may miss fewer corporate communications.
– Privacy considerations: OBOs keep holdings more private; NOBOs risk being added to marketing lists or contacted by the issuer or third parties.
– Voting/proxy procedures: Voting still runs through intermediaries under SEC rules, so being NOBO does not change the vote-transmission path.
For issuers and investor relations:
– Cost and efficiency: A NOBO list can reduce the need to route some materials through intermediaries and boosts direct shareholder outreach.
– Engagement: Companies that want to increase investor relations activity or solicit opinions may prefer deeper access to shareholder contact information.
– Legal compliance: Issuers must still respect SEC and privacy rules about how lists are used and how proxy solicitations are handled.
Arguments for and against NOBO disclosure
Arguments for disclosure (issuers):
– Lower distribution costs for communications and increased shareholder engagement.
– Better ability to target communications and cultivate investor relationships.
Arguments against disclosure (brokers and many investors):
– Privacy concerns for shareholders; potential unwanted contact or marketing.
– Brokers may lose revenue associated with forwarding materials and protecting customer lists; they may also worry about impacts on borrowing/stock-lending programs.
Arguments from investor perspective differ by profile: long-term retail investors seeking info may favor NOBO; privacy-focused or activist-averse investors may prefer OBO.
Practical steps — For individual investors
1. Review account documents: When you open or review a brokerage account, check whether there is a NOBO/OBO election and read the broker’s privacy policy.
2. Decide based on your priorities:
– Choose NOBO if you want direct issuer mailings and direct communication from companies you invest in.
– Choose OBO if you prefer privacy and do not want your name shared with issuers (or to reduce solicitation).
3. Make or change your choice:
– At account opening: select NOBO or OBO as part of the setup process.
– After account opening: contact your broker or use the online account preferences to change your status. Brokers typically can update the instruction with the transfer agent or clearing firm.
4. Confirm the effect on communications: Ask your broker which types of issuer materials you will receive directly versus via the broker (remember SEC rules on proxies).
5. Monitor mailings and solicitations: If you become a NOBO and begin receiving unwanted solicitations, you can revert to OBO/adjust marketing opt-outs with your broker.
Practical steps — For companies and issuers
1. Use transfer agent services: Work with your transfer agent to request NOBO lists through the clearing/processing chain (DTCC in the U.S. is often involved). Transfer agents know the mechanics of obtaining and using NOBO data legally and compliantly.
2. Understand permitted uses: Review SEC rules and your counsel guidance to determine which materials can be sent directly and which must go through intermediaries (proxies typically require intermediary routing).
3. Budget for fees and timing: Brokers/agents may charge fees for providing NOBO lists or for processing mailings; plan for lead times to obtain lists before mailings.
4. Protect data: Treat NOBO lists as confidential client information. Comply with privacy laws and contractual restrictions on use and resale.
5. Use the data carefully: Avoid excessive solicitation and follow best practices for investor relations outreach (clear opt-outs, appropriate frequency, accurate contact information).
Practical steps — For brokers and transfer agents
1. Explain choices clearly: Provide clients clear explanations of NOBO vs OBO at onboarding and in account settings.
2. Maintain compliance: Follow SEC guidance on proxy distribution and other regulatory obligations when responding to issuer requests.
3. Handle fees and privacy: If charging for list provision or forwarding materials, disclose fees clearly; maintain robust controls on client data.
4. Operationalize preference changes: Implement efficient processes so clients can change NOBO/OBO status and have changes propagated to issuers/transfer agents quickly.
Example scenarios
– Long-term retail investor who wants annual reports: Choose NOBO to receive issuer materials directly.
– Privacy-conscious investor worried about solicitations: Choose OBO to limit direct disclosure.
– Company preparing a rights offering: Request the NOBO list to mail circulars directly to consenting beneficial owners; arrange distribution timeline with transfer agent.
– Activist investor seeking to reach shareholders: May prefer that more shareholders be NOBOs to increase direct access (though proxies still flow via brokers).
Frequently asked questions (short)
– Will being a NOBO let me vote directly with the company? No — SEC requirements generally route proxy voting through the broker or intermediary even if you are a NOBO.
– Can I change my NOBO/OBO status? Yes — contact your broker or change your account preferences; it may take a few days to be reflected.
– Will issuers sell my information if I am a NOBO? Issuers may not freely resell lists in contravention of rules or agreements; however, being a NOBO makes it easier for third parties to contact you through issuer mailings or solicitation campaigns. Always check issuer and broker privacy policies.
Best-practice recommendations
– If you value direct corporate communication (annual reports, rights offers, investor relations), choose NOBO.
– If you value privacy and minimal direct solicitations, choose OBO.
– Review account agreements and privacy policies. Ask your broker how proxy materials and other communications are handled in practice.
– Companies should coordinate with their transfer agent and legal counsel before requesting NOBO lists and should treat such lists as confidential.
Regulatory and legal note
The SEC has set rules about how beneficial owners are defined and how communications (especially proxies) are distributed. Because rules and market practices can change, consider checking current SEC guidance or consulting legal counsel for issuer-side actions or for detailed regulatory interpretation.
Source
This article is based on general market practices and on the Investopedia overview of NOBOs (Investopedia / Dennis Madamba). For further reading, see: https://www.investopedia.com/terms/n/nobo.asp
If you’d like, I can:
– Draft sample language for a broker account instruction that explains NOBO vs OBO to clients; or
– Provide a short checklist issuers can use when requesting a NOBO list for a particular mailing. Which would you prefer?