A number of years ago, Richard was an employee of a share-broking firm and he also purchased 1,100 shares through the firm including some ASX listed shares in an Australian company (the company). In 2010 Richard left his employment with the firm to move to Europe.
Richard’s 2010 email
Richard emailed his broker at the firm and asked whether there was anything he needed to do before he left the country in order to trade. In his email, Richard noted that the firm had his SRN (shareholder reference number) for ASX stock. Richard also included in his email a New Zealand address for service. The firm did not reply to his email.
Share parcel sale and share consolidation
In August 2016, Richard contacted the firm and asked it to sell his 1,100 shares, however he no longer owned them.
It transpired that in 2012, the company, in which Richard held the shares, notified its shareholders that it would soon be conducting a sale of all share parcels held of 1,250 shares or less. If customers wanted to retain any share parcels held at less than that number, they needed to notify the company’s share registry.
If Richard’s address had been updated with the Australian registry he would have received the company’s notice and would have had the option to opt in, or not. As the company did not receive an opt in notice from Richard, it sold the shares (resulting in sale proceeds of $547.48 AUD). Richard did not receive payment of the $547.48 AUD so remained unaware the sale had occurred.
Following the share parcel sale, the company also conducted a 1 for 6 consolidation. If Richard had opted in to retain his 1,100 shares in 2012, by 2016 he would have had 184 shares (1,100 divided by 6), valued at $8.94 each. Had Richard sold the 184 shares in 2016, he would have recived sale proceeds of $1,644.96 AUD.
Richard said the firm should have advised him at the time he became a client, and in response to his 2010 email, that it would not update his contact details with the Australian registry.
Richard also said that when he first became the firm’s client it had told the Australian registry his contact details, so he thought the situation was no different when he sent his 2010 email.
Richard complained to FSCL.
The firm’s view
The firm said that it had no obligation to update the Australian registry following Richard’s 2010 email. The firm said its only obligation to Richard, who was not a full-service client of the firm, was to update its internal records with his address for service. The firm said it was Richard’s responsibility to update the Australian registry.
However, the firm was keen to resolve the complaint with Richard and offered to pay him $1,100 AUD in full and final settlement of his complaint. This was based on the difference between the proceeds Richard would have received if he held the 184 shares in 2016 ($1,644.96 AUD), and the proceeds of sale following the share parcel sale in 2012 ($547.48 AUD). That figure was $1,097.48 AUD which the firm rounded up to $1,100 AUD.
Richard accepted the settlement offer and the complaint was resolved.
We were never required to undertake a full investigation of Richard’s complaint, or make a decision.
However, if we had been required to make a decision, we may have considered that the firm should and could easily have replied to Richard’s email in 2010 to say that it was his responsibility to update the Australian registry with his New Zealand address for service.
Technically it was Richard’s responsibility to update the Australian registry, but he clearly asked for advice about any administration he needed to undertake to ensure his address was updated with all relevant parties. When Richard did not receive a reply, he assumed he had done all he needed to do, whereas the firm assumed Richard was aware he needed to update his address with the Australian registry.
This was a classic case of a communication breakdown, leading to an avoidable complaint.