As investors we're sometimes lumped into categories we didn't even know existed. If you own a stock through a brokerage firm, you're put in the category of being either an objecting beneficial owner (OBO) or a non-objecting beneficial owner (NOBO).
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Which category you fall in was likely determined when you set up your brokerage account, and it affects how companies are allowed to communicate with you. Here's a primer on what it means to be a non-objecting beneficial owner.
Who exactly is a non-objecting beneficial owner?
If you own stock in a company but don't actually hold the paper shares, meaning a brokerage holds the shares for you, you are a beneficial owner of those shares. As a beneficial owner, you can either object to your brokerage sharing your name, mailing address, and share amount with the company itself; or you can not object to sharing that information. If you don't object, you're a non-objecting beneficial owner.
The SEC explains the distinction like this:
Under Securities and Exchange Commission (SEC) rules, companies mainly communicate with beneficial owners through broker or bank intermediaries. Intermediaries are prohibited from disclosing to a company the identity of beneficial owners who object to that disclosure (objecting beneficial owners or OBOs), and the company cannot contact OBOs directly. The company may contact directly shareowners who do not object (non-objecting beneficial owners or NOBOs), but SEC rules nonetheless require that proxy materials be forwarded to them by the intermediaries. The OBO/NOBO distinction impedes company communications with beneficial owners and communications among shareowners.
This structure means that there's an intermediary between you and a company, reducing potential solicitation (or just annoying communication) from companies. But that's not the way all companies want it.
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Companies will often want to communicate with you to persuade you to vote a certain way in proxy votes or other shareholder items. By mailing, emailing, or calling you directly they could cut costs and be more effective in swaying your vote their way.
This could also lead to a certain level of corporate spam if companies communicate too much. So there's a balance to be achieved.
The SEC has considered changing the non-objecting beneficial owner category to allow more free communication between companies and their shareholders, but for now your broker will likely act as a middleman, delivering communications to you and voting materials as they come in.
It's not all bad being a non-objecting beneficial owner
Really, the only difference between an objecting beneficial owner and a non-objecting beneficial owner is how much a company whose shares you own knows about you. It probably makes no difference in the way you invest or how you would vote in proxy votes. But it may affect the way companies communicate with you, and that's something worth knowing when you set up your brokerage account.
The article What is a Non-Objecting Beneficial Owner? originally appeared on Fool.com.
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