Non-Objecting Beneficial Owner (NOBO)

Who is a Non-Objecting Beneficial Owner (NOBO)?

The term non-objecting beneficial owner (NOBO) refers to beneficial owners of companies who have permitted their financial institutions to release their personal information to the companies they have invested in. The information given out includes the name and address of the beneficial owner, along with information regarding their investment in the security.

A company will generally have the contact information of their NOBOs. This allows them to contact their investors directly with communications related to the company.

In contrast, objecting beneficial owners (OBOs) are beneficial owners who prohibit their financial institutions from disclosing their personal information. In such cases, the company will not know the identity and personal information of the investor, and the investor will receive any communication from the company through a broker or intermediary.

Investors are almost always given a choice as to whether or not they want to be a NOBO when opening a trading account with a financial institution or broker.

NOBOs vs. OBOs – Example of Investor Communication Chain

Let’s say for simplicity that a corporation has two retail investors – Investor A and Investor B. Both of them have a brokerage account with the same financial institution. Investor A is a NOBO, while Investor B is an OBO. Let’s assume that the company they both have invested in is releasing a new investor presentation, and it wants to send the presentation to its investors.

Since Investor A is a NOBO, he will most likely get this news in his email directly from the company. On the other hand, Investor B will get this news in his email from the broker or financial institution that holds the shares. Generally, a NOBO will receive the communication before an OBO, as there is no intermediary involved.

Securities and Exchange Commission (SEC) Laws

The Securities and Exchange Commission (SEC) has created the distinction between NOBOs and OBOs to protect investors from potential solicitation and unnecessary corporate spam. For example, companies may try to communicate with investors to persuade them to vote in a particular direction on a proxy vote or other shareholder approval items. It can interfere with independent decision-making.

Furthermore, some companies tend to over-communicate, which can lead to a certain level of corporate spam. By adding an intermediary, the cost of communication for companies increases. As a result, they are less likely to send unnecessary communications.

Under SEC laws, intermediaries are strictly prohibited from disclosing the name and personal information of OBOs. As a result, the company cannot contact OBOs directly. Even though companies can directly contact NOBOs, the SEC still requires that proxy materials be forwarded to investors only via an intermediary. It is to avoid solicitation.

Advantages of Being a Non-Objecting Beneficial Owner (NOBO)

There are some advantages to being a NOBO, especially when it comes to receiving important communication promptly. Companies and issuers request the personal contact information of their investors so they can directly contact their shareholders regarding important investor communications such as financial reports, investor presentations, press releases, and other shares-related information.

There has been much debate amongst the different players in the financial industry regarding the distinction between NOBOs and OBOs. Corporations and investors that prefer to be NOBOs often cite these two common advantages:

1. Time and cost efficiencies

Directly communicating with investors saves time and administrative costs for both the company and the investors. Financial intermediaries such as brokerage firms generally charge the company and its investors a small fee for receiving and forwarding investor communications. Both the company and the investors would save on the administrative cost if communications were sent to investors directly.

2. Stronger relationships with retail investors

Another reason most corporations are against having this distinction is due to SEC rules. Under SEC rules, communication between corporations and investors is done through a bank or broker that holds shares for investors.

If an investor has opted to be an OBO, intermediaries are prohibited from disclosing the identity or other personal information of investors to the company. It means corporations cannot know the profile of their retail investors. Corporations argue that not having this distinction would allow for greater transparency and stronger relationships with retail investors.

Related Readings

Thank you for reading CFI’s guide to Non-Objecting Beneficial Owner. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

• Brokerage
• Financial Intermediary
• Proxy Vote
• SEC Filings
• See all wealth management resources