Empty voting: back in the spotlight?
05 July 2022
Recent action of an EU-based bank in borrowing stock to vote at a company AGM prompted criticism from industry working groups. Bob Currie examines the fallout from this widely-publicised case
Image: stock.adobe.com
Drawing on instinct rather than hard empirical evidence, it seems likely that the securities lending industry does not have a major current problem with empty voting — the practice of borrowing shares with the primary purpose of voting those shares at a forthcoming AGM or EGM.
The European Securities Markets Authority (ESMA), the EU securities markets regulator, commissioned a call for evidence just over 10 years ago to analyse potential issues and concerns raised by empty voting and to evaluate the need for further action. In publishing the responses, ESMA concluded that no regulatory tightening was necessary at that time.
Reporting on the process, corporate governance and responsible investment expert Sarah Wilson, CEO of Minerva Analytics, notes that ESMA did not feel the need to take further regulatory action — “possibly because the overwhelming majority of respondents could cite no concrete evidence of empty voting”.
Many institutional lenders are taking their fiduciary responsibilities very seriously as stewards of their clients’ assets — and often this extends to maintaining a watchful eye on forthcoming company meetings and monitoring any abnormal patterns in lines of stock that they have out on loan.
While many annual or extraordinary general meetings (AGMs, EGMs) have passed since ESMA commissioned its call for evidence in 2011, there have been few reports in the specialist press to suggest that empty voting has mushroomed over the subsequent period.
Given this lack of noise, recent borrowing and voting practices linked to an April AGM of Italian insurer Assicurazioni Generali have raised collective eyebrows across the industry — prompting concern, sometimes anger, among institutional lenders and industry working groups.
A representative from one institutional asset manager told SFT that instances such as the recent Mediobanca borrowing of Generali stock could “put the fear of God” into some institutional lenders, particularly in light of their declared commitment to socially-responsible investment (SRI) and ESG principles. “We are constantly telling our fund managers that we apply high governance standards to our lending programme and that we will recall stock when necessary around record dates,” said the respondent. “This [recent case of borrowing stock for voting purposes] may undermine that confidence.”
In the most recent meeting of the Bank of England (BoE) Securities Lending Committee, discussion moved on to the subject of empty voting, particularly in connection with this widely-publicised instance where a counterparty had borrowed shares for voting purposes at a forthcoming AGM.
The Committee, which was attended by 20 senior representatives from the securities lending industry and three representatives from the Bank of England, expressed disappointment that this transaction had taken place in clear breach of Chapter 4, section 6.3 of the UK Money Markets Code.
This group re-iterated that borrowing specifically to vote is “contrary to the widely agreed best practice in the market”.
According to the minutes of this meeting, which were published on 27 May, Committee members confirmed that the Money Markets Code should be upheld at all times to provide confidence to institutional investors that their shares and lending actions will not be “contorted” by the actions of borrowers.
In a recent blog post on the International Securities Lending Association’s (ISLA’s) website, ISLA CEO Andrew Dyson looks back to a case in July 2002 when Laxey partners, an Isle of Man-based hedge fund that was incorporated in 2000, borrowed approximately 6 per cent of share capital in British Land with the primary objective of voting against management.
Dyson observes that the action of borrowing securities to influence a vote at an AGM must be seen as market manipulation no matter which era this action is taking place. This, and other similar instances, led directly to creation of the UK Money Markets Code which states that firms have a responsibility not to engage in this practice. The most recent version of this Code, published in April 2021, states that "it is accepted good practice in the market that securities should not be borrowed solely for the purpose of exercising the voting rights at, for example, an AGM or EGM".
Although the issuer, the borrower and the AGM were not named by Dyson, nor by the Bank of England Securities Lending Committee, the case is understood by SFT to refer the action of Mediobanca, the Milan-based investing banking group, in increasing its shareholding in Italian insurer Assicurazioni Generali through borrowing shares prior to an AGM that took place on 29 April 2022.
Mediobanca was understood to favour the re-election of CEO Philippe Donnet, whose leadership was under challenge from a number of shareholders that opposed Donnet’s re-election for a third term. This included Generali shareholders Francesco Gaetano Caltagirone and Leonardo Del Vecchio, who wished to see a reshuffle at CEO and executive level to drive faster growth and a step up in M&A activity from the Milan-based insurer.
The bank made no secret of the steps it took to increase its shareholding in Generali through borrowing shares in the company. In a public statement on 23 September 2021, marked as "price sensitive", Mediobanca indicated that it had “executed a securities lending transaction with a leading market counterparty in respect of a total of 70 million Assicurazioni Generali shares, equal to 4.42 per cent of the company’s share capital.”
This transaction was conducted on a closed basis and with a duration of approximately eight months, or “at least until the AGM called to reappoint the company’s Board of Directors”. Alongside the shares that it already owned, Mediobanca reported that this loan stock took its interest in Assicurazioni Generali to 17.22 per cent of the voting rights in the company.
In addition to confirming that it had borrowed stock to vote at an AGM, Mediobanca made it clear, in a public statement on 11 April 2022, that it believes it is “fully legitimate” to exercise voting in Assicurazioni Generali shares that it had borrowed for this purpose (see box) — indicating that this is an appropriate action to protect its proprietary investment of close to €4 billion.
Mediobanca clarifies its position on borrowing shares to vote
In a public announcement on 11 April 2022, Mediobanca declared that, in the company’s opinion, it is legitimate to exercise voting rights in Assicurazioni Generali shares that it had borrowed for this purpose. Its statement reads:
“As requested by Consob, and with reference to the articles that have appeared in the press regarding the securities lending transaction involving Assicurazioni Generali shares disclosed in the press release issued on 23 September 2021, Mediobanca, under the terms of the contract signed, hereby clarifies that it is fully legitimate to exercise at the Annual General Meeting of Assicurazioni Generali to be held shortly the voting rights in respect of the shares borrowed.
“In this regard, Mediobanca reiterates that the aim of the aforementioned securities lending transaction is to protect its proprietary investment which, at market value, is equivalent to approximately €4 billion and whose economic contribution is part of the financial objectives set out in the Bank's current three-year plan.”
Reuters’ bureau in Milan, referring to a filing to the financial regulator, reports that on 18 May Mediobanca’s holding in Generali fell back to just under 13 per cent of total share capital after the bank returned shares that it had borrowed prior to the Generali AGM that took place on 29 April.
While Mediobanca maintains that its actions in borrowing stock for voting purposes were “legitimate” as means of protecting its investment in Generali, this position was not shared by ISLA or by members of the Bank of England Securities Lending Committee.
On this point, ISLA’s Dyson says that it was “disappointing” to recently see the open use of securities lending to gather votes ahead of a public AGM. “While our position is very clear on this issue, I would also stress the reputational damage this type of activity could have on our industry,” he says.
The Money Markets Code indicates that lenders should consider their corporate governance responsibilities prior to lending stock over a period when an AGM or EGM is expected to be held.
Dyson indicates that similar principles are embedded in ISLA’s guide on Voting Practices & Shareholder Engagement, which was developed and published in conjunction with four other regional securities lending associations towards the end of 2021.
He also points to the Borrowers’ Warranties provisions within the Global Master Securities Lending Agreement (GMSLA) 2010, where 14(e) requires a contracting party to confirm that "it is not entering into a loan for the primary purpose of obtaining or exercising voting rights in respect of the loaned securities”.
Set against a progressively engaged institutional investor community, Dyson says that it is vitally important that ISLA works with this community and other relevant stakeholders to ensure that those with the right to vote can do so in an open and transparent way.
For participants in the BoE Committee, a primary consideration was how the market authorities should police this activity and respond in cases of breach. For the example at hand, where a non-UK bank has borrowed stock in an Italian issuer for voting purposes, the borrower might not be guided by the UK Money Markets Code — and there is need for clarification regarding how far a UK-based watchdog will have authority over non-UK entities in cases where a loan transaction is executed in the UK market.
The head of global securities lending at an international asset manager told SFT that if they have clear evidence of stock being borrowed for lending purposes, their policy is to cease lending to, and engaging with, entities that are participating in, or acting as lending intermediaries, for those trades. “If we are serious about actively implementing our ESG agendas, then this action must be an integral part of that policy,” said the respondent.
This reinforces the point that beneficial owners need to be looking closely at their lending books, they need to be actively monitoring their positions, questioning why stock is going out on loan – and when they see large movements in shares in which they have significant loan positions, this needs to be flagged and investigated.
This oversight can be complex and costly to manage, notes the respondent — and an unintended consequence may be that this will discourage lending by smaller beneficial owners that have limited scale and lack the in-house expertise to accommodate these costs and oversight responsibilities.
Significantly, if the additional costs and reputational risks attached to securities lending continue to increase, lending may become more difficult to justify internally [to fund boards and risk committees] as an attractive source of risk-adjusted return. Some fund boards are already divided regarding whether the benefits of securities lending justify the risk and costs, said the respondent – and the Generali case provides further grounds for sceptics to question the benefits of the lending programme.
Proxy voting and responsible investment specialist ISS, now majority owned by Deutsche Börse, declined to comment on the details of the Mediobanca case. However, ISS executive director for communications Sarah Ball confirmed to SFT that the products and tools offered by ISS help investors to anticipate when future AGM dates are likely to occur, enabling these investors to recall any shares they may have out on loan to ensure they will be “on the book of records for the company and eligible to vote their shares at the meeting”.
In line with this sentiment, Roy Zimmerhansl, practice lead at Pierpoint Consulting, notes that investors may restrict shares from being available for loan over a record date (for example, prior to an AGM or EGM) and they may recall shares that are on loan as a meeting approaches. “That, I believe, is how good investor governance should operate,” he says.
A number of institutional investors have been calling for greater transparency around the reasons for borrowing shares – including the Government Pension Fund of Japan, which took the decision in December 2019 to suspend stock lending against short selling activity, believing this practice to be inconsistent with its responsibilities as a long-term investor.
However, Zimmerhansl believes this call for transparency is problematic to implement. Borrowers are unlikely to disclose if their principal reason for borrowing stock is for voting purposes — and securities lending intermediaries (typically agent lenders, prime brokers) in many cases do not have access to full information, and supporting evidence, of why shares are being borrowed.
When a share is borrowed, the borrower must return an equivalent security to the lender – with shares being fungible under the lending agreement. However, if shares are re-loaned or re-financed as part of a chain of transactions, this reinforces the complexity of monitoring the borrowers’ reasons for borrowing stock across this chain of interlinked transactions.
In line with these considerations, Zimmerhansl believes that steps to prevent empty voting should be beneficial owner led, with investor associations playing an active role in coordinating these initiatives. “If they wish to restrict voting on their stock, institutional lenders will typically restrict lending and recall shares around record date. Lending intermediaries have an important role to play in executing these functions efficiently in line with the terms of the lending agreement,” he says.
Powers of enforcement
We have noted in this article that guidance in the Money Markets Code and the General Master Securities Lending Agreement is generally pretty clear — borrowers should not be sourcing stock to vote at an AGM or EGM. But what enforcement powers are available if firms are in breach? And who will enforce this?
Responding to this question, ISLA’s Andrew Dyson observes that the UK Money Markets Code is classified as a ‘Recognised Code’ by the Financial Conduct Authority, the relevant industry regulator, in the UK. “As such, individuals subject to the Senior Managers and Certification Regime (SM&CR) need to meet the requirements for market conduct, including behaviour in line with the requirements of the Recognised Codes, and including the provisions within the Money Markets Code,” he says. “These provisions effectively link personal accountability to adherence with the provisions of the Code.”
Another industry veteran made the point that the Bank of England Money Markets Code is — as its name suggests — a code of best practice. If financial regulators believe that borrowing stock for voting purposes is unacceptable, the practice should be made illegal and appropriate enforcement measures must be set in place.
A broader question is whether the anxieties triggered by this recent case will prompt financial supervisors to tighten their scrutiny of securities lending markets around record date prior to corporate events, including company AGM and EGM. The BoE Securities Lending Committee noted that transaction records collected under Securities Financing Transactions Regulation (SFTR) reporting provides a data pool that could provide information on how a position is building prior to a company meeting.
“There is no doubt that reporting regimes such as SFTR do potentially allow regulators to understand these borrowing patterns,” says ISLA’s Dyson. “Set against this backdrop, the regulatory position here in the UK is clear and has been with us for roughly 20 years,” he concludes. “We may also see pressure for similar regimes elsewhere across Europe, especially as shareholder activism gains further momentum.”
Putting this dialogue in perspective, we should recognise that a well-reported case of borrowing stock for voting purposes does not constitute a trend. As Dyson notes, this instance appears to be an exception, rather than common practice. “Although we do not have access to any underlying market data, the recent example of borrowing securities with the apparent primary purpose of voting at an AGM is, in my view, an infrequent event,” he says. “Increasingly, institutional investors are engaging more broadly with the companies they invest in and as such they would be less inclined to lend securities over record dates.”
Notwithstanding, the industry’s response to Mediobanca’s action highlights that many are committed to preventing complacency and ensuring that this practice does not proliferate.
The European Securities Markets Authority (ESMA), the EU securities markets regulator, commissioned a call for evidence just over 10 years ago to analyse potential issues and concerns raised by empty voting and to evaluate the need for further action. In publishing the responses, ESMA concluded that no regulatory tightening was necessary at that time.
Reporting on the process, corporate governance and responsible investment expert Sarah Wilson, CEO of Minerva Analytics, notes that ESMA did not feel the need to take further regulatory action — “possibly because the overwhelming majority of respondents could cite no concrete evidence of empty voting”.
Many institutional lenders are taking their fiduciary responsibilities very seriously as stewards of their clients’ assets — and often this extends to maintaining a watchful eye on forthcoming company meetings and monitoring any abnormal patterns in lines of stock that they have out on loan.
While many annual or extraordinary general meetings (AGMs, EGMs) have passed since ESMA commissioned its call for evidence in 2011, there have been few reports in the specialist press to suggest that empty voting has mushroomed over the subsequent period.
Given this lack of noise, recent borrowing and voting practices linked to an April AGM of Italian insurer Assicurazioni Generali have raised collective eyebrows across the industry — prompting concern, sometimes anger, among institutional lenders and industry working groups.
A representative from one institutional asset manager told SFT that instances such as the recent Mediobanca borrowing of Generali stock could “put the fear of God” into some institutional lenders, particularly in light of their declared commitment to socially-responsible investment (SRI) and ESG principles. “We are constantly telling our fund managers that we apply high governance standards to our lending programme and that we will recall stock when necessary around record dates,” said the respondent. “This [recent case of borrowing stock for voting purposes] may undermine that confidence.”
In the most recent meeting of the Bank of England (BoE) Securities Lending Committee, discussion moved on to the subject of empty voting, particularly in connection with this widely-publicised instance where a counterparty had borrowed shares for voting purposes at a forthcoming AGM.
The Committee, which was attended by 20 senior representatives from the securities lending industry and three representatives from the Bank of England, expressed disappointment that this transaction had taken place in clear breach of Chapter 4, section 6.3 of the UK Money Markets Code.
This group re-iterated that borrowing specifically to vote is “contrary to the widely agreed best practice in the market”.
According to the minutes of this meeting, which were published on 27 May, Committee members confirmed that the Money Markets Code should be upheld at all times to provide confidence to institutional investors that their shares and lending actions will not be “contorted” by the actions of borrowers.
In a recent blog post on the International Securities Lending Association’s (ISLA’s) website, ISLA CEO Andrew Dyson looks back to a case in July 2002 when Laxey partners, an Isle of Man-based hedge fund that was incorporated in 2000, borrowed approximately 6 per cent of share capital in British Land with the primary objective of voting against management.
Dyson observes that the action of borrowing securities to influence a vote at an AGM must be seen as market manipulation no matter which era this action is taking place. This, and other similar instances, led directly to creation of the UK Money Markets Code which states that firms have a responsibility not to engage in this practice. The most recent version of this Code, published in April 2021, states that "it is accepted good practice in the market that securities should not be borrowed solely for the purpose of exercising the voting rights at, for example, an AGM or EGM".
Although the issuer, the borrower and the AGM were not named by Dyson, nor by the Bank of England Securities Lending Committee, the case is understood by SFT to refer the action of Mediobanca, the Milan-based investing banking group, in increasing its shareholding in Italian insurer Assicurazioni Generali through borrowing shares prior to an AGM that took place on 29 April 2022.
Mediobanca was understood to favour the re-election of CEO Philippe Donnet, whose leadership was under challenge from a number of shareholders that opposed Donnet’s re-election for a third term. This included Generali shareholders Francesco Gaetano Caltagirone and Leonardo Del Vecchio, who wished to see a reshuffle at CEO and executive level to drive faster growth and a step up in M&A activity from the Milan-based insurer.
The bank made no secret of the steps it took to increase its shareholding in Generali through borrowing shares in the company. In a public statement on 23 September 2021, marked as "price sensitive", Mediobanca indicated that it had “executed a securities lending transaction with a leading market counterparty in respect of a total of 70 million Assicurazioni Generali shares, equal to 4.42 per cent of the company’s share capital.”
This transaction was conducted on a closed basis and with a duration of approximately eight months, or “at least until the AGM called to reappoint the company’s Board of Directors”. Alongside the shares that it already owned, Mediobanca reported that this loan stock took its interest in Assicurazioni Generali to 17.22 per cent of the voting rights in the company.
In addition to confirming that it had borrowed stock to vote at an AGM, Mediobanca made it clear, in a public statement on 11 April 2022, that it believes it is “fully legitimate” to exercise voting in Assicurazioni Generali shares that it had borrowed for this purpose (see box) — indicating that this is an appropriate action to protect its proprietary investment of close to €4 billion.
Mediobanca clarifies its position on borrowing shares to vote
In a public announcement on 11 April 2022, Mediobanca declared that, in the company’s opinion, it is legitimate to exercise voting rights in Assicurazioni Generali shares that it had borrowed for this purpose. Its statement reads:
“As requested by Consob, and with reference to the articles that have appeared in the press regarding the securities lending transaction involving Assicurazioni Generali shares disclosed in the press release issued on 23 September 2021, Mediobanca, under the terms of the contract signed, hereby clarifies that it is fully legitimate to exercise at the Annual General Meeting of Assicurazioni Generali to be held shortly the voting rights in respect of the shares borrowed.
“In this regard, Mediobanca reiterates that the aim of the aforementioned securities lending transaction is to protect its proprietary investment which, at market value, is equivalent to approximately €4 billion and whose economic contribution is part of the financial objectives set out in the Bank's current three-year plan.”
Reuters’ bureau in Milan, referring to a filing to the financial regulator, reports that on 18 May Mediobanca’s holding in Generali fell back to just under 13 per cent of total share capital after the bank returned shares that it had borrowed prior to the Generali AGM that took place on 29 April.
While Mediobanca maintains that its actions in borrowing stock for voting purposes were “legitimate” as means of protecting its investment in Generali, this position was not shared by ISLA or by members of the Bank of England Securities Lending Committee.
On this point, ISLA’s Dyson says that it was “disappointing” to recently see the open use of securities lending to gather votes ahead of a public AGM. “While our position is very clear on this issue, I would also stress the reputational damage this type of activity could have on our industry,” he says.
The Money Markets Code indicates that lenders should consider their corporate governance responsibilities prior to lending stock over a period when an AGM or EGM is expected to be held.
Dyson indicates that similar principles are embedded in ISLA’s guide on Voting Practices & Shareholder Engagement, which was developed and published in conjunction with four other regional securities lending associations towards the end of 2021.
He also points to the Borrowers’ Warranties provisions within the Global Master Securities Lending Agreement (GMSLA) 2010, where 14(e) requires a contracting party to confirm that "it is not entering into a loan for the primary purpose of obtaining or exercising voting rights in respect of the loaned securities”.
Set against a progressively engaged institutional investor community, Dyson says that it is vitally important that ISLA works with this community and other relevant stakeholders to ensure that those with the right to vote can do so in an open and transparent way.
For participants in the BoE Committee, a primary consideration was how the market authorities should police this activity and respond in cases of breach. For the example at hand, where a non-UK bank has borrowed stock in an Italian issuer for voting purposes, the borrower might not be guided by the UK Money Markets Code — and there is need for clarification regarding how far a UK-based watchdog will have authority over non-UK entities in cases where a loan transaction is executed in the UK market.
The head of global securities lending at an international asset manager told SFT that if they have clear evidence of stock being borrowed for lending purposes, their policy is to cease lending to, and engaging with, entities that are participating in, or acting as lending intermediaries, for those trades. “If we are serious about actively implementing our ESG agendas, then this action must be an integral part of that policy,” said the respondent.
This reinforces the point that beneficial owners need to be looking closely at their lending books, they need to be actively monitoring their positions, questioning why stock is going out on loan – and when they see large movements in shares in which they have significant loan positions, this needs to be flagged and investigated.
This oversight can be complex and costly to manage, notes the respondent — and an unintended consequence may be that this will discourage lending by smaller beneficial owners that have limited scale and lack the in-house expertise to accommodate these costs and oversight responsibilities.
Significantly, if the additional costs and reputational risks attached to securities lending continue to increase, lending may become more difficult to justify internally [to fund boards and risk committees] as an attractive source of risk-adjusted return. Some fund boards are already divided regarding whether the benefits of securities lending justify the risk and costs, said the respondent – and the Generali case provides further grounds for sceptics to question the benefits of the lending programme.
Proxy voting and responsible investment specialist ISS, now majority owned by Deutsche Börse, declined to comment on the details of the Mediobanca case. However, ISS executive director for communications Sarah Ball confirmed to SFT that the products and tools offered by ISS help investors to anticipate when future AGM dates are likely to occur, enabling these investors to recall any shares they may have out on loan to ensure they will be “on the book of records for the company and eligible to vote their shares at the meeting”.
In line with this sentiment, Roy Zimmerhansl, practice lead at Pierpoint Consulting, notes that investors may restrict shares from being available for loan over a record date (for example, prior to an AGM or EGM) and they may recall shares that are on loan as a meeting approaches. “That, I believe, is how good investor governance should operate,” he says.
A number of institutional investors have been calling for greater transparency around the reasons for borrowing shares – including the Government Pension Fund of Japan, which took the decision in December 2019 to suspend stock lending against short selling activity, believing this practice to be inconsistent with its responsibilities as a long-term investor.
However, Zimmerhansl believes this call for transparency is problematic to implement. Borrowers are unlikely to disclose if their principal reason for borrowing stock is for voting purposes — and securities lending intermediaries (typically agent lenders, prime brokers) in many cases do not have access to full information, and supporting evidence, of why shares are being borrowed.
When a share is borrowed, the borrower must return an equivalent security to the lender – with shares being fungible under the lending agreement. However, if shares are re-loaned or re-financed as part of a chain of transactions, this reinforces the complexity of monitoring the borrowers’ reasons for borrowing stock across this chain of interlinked transactions.
In line with these considerations, Zimmerhansl believes that steps to prevent empty voting should be beneficial owner led, with investor associations playing an active role in coordinating these initiatives. “If they wish to restrict voting on their stock, institutional lenders will typically restrict lending and recall shares around record date. Lending intermediaries have an important role to play in executing these functions efficiently in line with the terms of the lending agreement,” he says.
Powers of enforcement
We have noted in this article that guidance in the Money Markets Code and the General Master Securities Lending Agreement is generally pretty clear — borrowers should not be sourcing stock to vote at an AGM or EGM. But what enforcement powers are available if firms are in breach? And who will enforce this?
Responding to this question, ISLA’s Andrew Dyson observes that the UK Money Markets Code is classified as a ‘Recognised Code’ by the Financial Conduct Authority, the relevant industry regulator, in the UK. “As such, individuals subject to the Senior Managers and Certification Regime (SM&CR) need to meet the requirements for market conduct, including behaviour in line with the requirements of the Recognised Codes, and including the provisions within the Money Markets Code,” he says. “These provisions effectively link personal accountability to adherence with the provisions of the Code.”
Another industry veteran made the point that the Bank of England Money Markets Code is — as its name suggests — a code of best practice. If financial regulators believe that borrowing stock for voting purposes is unacceptable, the practice should be made illegal and appropriate enforcement measures must be set in place.
A broader question is whether the anxieties triggered by this recent case will prompt financial supervisors to tighten their scrutiny of securities lending markets around record date prior to corporate events, including company AGM and EGM. The BoE Securities Lending Committee noted that transaction records collected under Securities Financing Transactions Regulation (SFTR) reporting provides a data pool that could provide information on how a position is building prior to a company meeting.
“There is no doubt that reporting regimes such as SFTR do potentially allow regulators to understand these borrowing patterns,” says ISLA’s Dyson. “Set against this backdrop, the regulatory position here in the UK is clear and has been with us for roughly 20 years,” he concludes. “We may also see pressure for similar regimes elsewhere across Europe, especially as shareholder activism gains further momentum.”
Putting this dialogue in perspective, we should recognise that a well-reported case of borrowing stock for voting purposes does not constitute a trend. As Dyson notes, this instance appears to be an exception, rather than common practice. “Although we do not have access to any underlying market data, the recent example of borrowing securities with the apparent primary purpose of voting at an AGM is, in my view, an infrequent event,” he says. “Increasingly, institutional investors are engaging more broadly with the companies they invest in and as such they would be less inclined to lend securities over record dates.”
Notwithstanding, the industry’s response to Mediobanca’s action highlights that many are committed to preventing complacency and ensuring that this practice does not proliferate.
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