The No-Look-Through Principle: Investor Rights, Distributed Ledger Technology, and the Market

Abstract

This paper analyses the no-look-through approach adopted in the UK for the analysis of intermediated securities. It discusses the advantages and disadvantages associated with this approach. The model benefits intermediaries and can also have advantages for issuers. Recent case law has demonstrated that the model has the effect of disenfranchising investors. In the short term the problem for investors can be resolved by bond investors contracting out of English law. Equity investors can opt to hold securities directly through personal accounts with the CSD.

In recent years, distributed ledger technology has been hailed as providing a solution for the problems associated with distributed ledger technology, while at the same time preserving the advantages of the current model. The paper surveys the literature that has emerged in this regard. In light of previous failed attempts by the market to create more efficient technological solutions, there is no realistic hope that the market will be able to create a system that better serves investors. The conclusion of this contribution is that the government should step in. The contribution makes suggestions for ways in which this could be done. The recent Scoping Study conducted by the UK Law Commission combined with the desire of the UK Government to attract a global pool of investors suggests that the UK Government is motivated to address the problem.