Direct and indirect ownership
Looking at the Canadian Insider chart it shows that William Day Construction and 2176423 Ontario Inc both have direct ownership, while Eric Sprott has inditect ownership. The numbered company and Sprott both purchase the same number of shares on the same dates so obviously they are related or associated. It states that indirect ownership does not give you voting rights, and that can be part of a fund. I thought maybe the numbered company was a fund but it's strange they are direct and Sprott is indirect. I attached a blurb below on the topic as well as a link to the Canadian Insider.
https://www.canadianinsider.com/node/7?menu_tickersearch=WM+%7C+Wallbridge+Mining+Company Direct or Indirect — How Do You Know?
How do you know whether your stock ownership is direct or indirect? The primary consideration is whether or not you control the stock’s voting rights. Remember, among other rights of ownership, shareholders elect the company’s board of directors.
This is potentially a big deal, since the board works for the shareholders and company management reports to the board. With direct stock ownership, you control those voting rights. Activist shareholders can pressure the board and company management to make significant changes in the way the business is run.
But shares of stock do not have to be held in your personal brokerage account or 401(k) to be classified as directly owned. Individual stocks held in a trust or partnership that you control are classified as direct ownership, because you can vote as a shareholder.
Privileges of Direct Stock Ownership
With direct stock ownership:
- You have voting rights that could impact the company’s management.
- You control whether and when to realize capital gains or losses by selling shares. And you can (usually) specify which shares you sell to maximize or minimize that gain or loss. This can be quite valuable for tax planning.
- You decide when to increase or decrease the amount of your money invested in the stock and even when to ditch the stock completely, unless your ownership is through a trust or partnership with rules that restrict stock sales.
If you own shares through a fund, you do not have voting rights for the stocks the fund owns. So your ownership is indirect. You have voting rights for the shares of the fund. This includes the right to approve the fund’s board of directors. But the fund is the direct owner of the individual stocks it holds. And the fund has the right to vote on shareholder issues. In terms of tax planning, ETFs usually attempt to minimize the fund’s realized capital gains. A mutual fund may or may not do so, depending on its particular strategy.
Indirect ownership also occurs when you own shares of Company A, which owns shares of Company Z. This can happen with publicly traded firms or with private companies. You may recall that Yahoo owned 15% of the huge Chinese e-commerce company Alibaba before Alibaba was a publicly traded company. Therefore, Yahoo shareholders were indirect owners of Alibaba.
Insider Trading — A Different Definition of Direct Ownership
The term “indirect ownership” has a different meaning when it comes to insider trading rules.
It is illegal to trade a company’s stock based on inside information (i.e., information that has not been made available to the general public).
As an employee or a friend or relative of an employee or a consultant or auditor or lawyer working for a company, you may have access to non-public information. You can be criminally prosecuted for trading the company’s stock based on inside information, even if the shares traded are held in an account that is not in your name and which you don’t control.
Shares controlled by any immediate family member would be considered “indirectly owned” by you, but the term is used differently than what was discussed above.
Summary
When comparing direct versus indirect ownership, it is not a matter of “better or worse.”
Owning shares directly gives you a great deal of control over your investment life. But it comes with the responsibility of selecting, monitoring and deciding when to buy and sell those individual stocks. And you also get to vote your shares. Many investors prefer indirect ownership, outsourcing all of that to the professionals who manage mutual funds and ETFs.
Ultimately, when it comes to stock ownership, it’s OK to be direct or indirect, whichever suits your needs.