1. Understanding Investor Rights in More Detail
2. Interactions With Securities Brokerage Firms and Investment Advisors
3. Anti-Dilution Provision

Investor rights are the rights granted to shareholders in the corporation. Those rights include:

  • The right to attend the annual general meeting (AGM) and any other called meetings.
  • The right to vote on resolutions, both ordinary and special.
  • The right to propose your own resolutions.
  • The right to participate in the appointment of directors.
  • The right to voice an opinion on remuneration practices.
  • The right to your share of the business profits and assets (at dissolution).
  • The right to review the annual reports and accounting.
  • The right to file for court intervention on behalf of the company, not personally, through The Derivative Claim if the investor feels the directors are mismanaging the business.

Understanding Investor Rights in More Detail

Whether it's a way to save for college, retirement, or another long-term goal, investors often choose to put their money into company stocks. However, they don't always understand the rights this entitles them to. Investors are considered shareholders and owners of the company with a say in how the organization is operated. This is different from the company's directors, who manage the business on a day-to-day basis.

While investor rights are generally governed by law, it's important to reach the shareholders' agreement to understand any situation where those rights can be modified or reduced. Even after you've read and are familiar with this document, you should keep it on hand for future reference. Though you do own a share of the company, your rights as a shareholder don't include waltzing in and demanding changes. The directors are responsible for the day-to-day operations. Any changes you'd like to suggest must be proposed at a general meeting through a written resolution.

Interactions With Securities Brokerage Firms and Investment Advisors

As they relate to interactions with investment advisors, securities brokerage firms, and their representatives, investor rights include:

  • The right to expect fairness and good faith performance in those interactions.
  • The right to knowledge of the risks, facts, and costs of any investment recommended or sold by those entities.
  • The right to advice and recommendations that are in line with the investor's level of experience, goals, timeline, tolerance for risk, and other points that may be relevant based on the Customer Investment Profile (CIP). The CIP takes into account the investor's age, job status, financial situations, and needs.
  • The right to pay a fair price for services received.
  • The right to detailed and clear information about the fees, charges, and costs involved.
  • The right to clearly understandable, accurate, and timely account statements with transactions clearly detailed.
  • The right to a clear description of privacy policies and protection of personal information that is not open to the public.
  • The right to expect the firms to adhere to all federal and state regulations and laws relating to the sale of securities, the provision of investment advice, and the daily operation of the company.
  • The right to expect adherence to professional standards set by regulatory bodies.
  • The right to know about any interests of the other party that may create a conflict of interest with the investor's interests.
  • The right to professional help in developing the Customer Investment Profile.
  • The right to choose any broker or advisor you want to work with, and the right to change to a different firm for any reason.
  • The right to move your accounts elsewhere whenever you want simply and efficiently.
  • The right to a response from the management of the firm to complaints you may file.

Anti-Dilution Provision

The anti-dilution provision is a protective clause that keeps a corporation from diluting investors by selling stock to someone else for a lower price than the investor paid. The sale of any stock technically causes dilution in its most basic sense; it divides the ownership of the company further, lowering the original investors' ownership percentage.

However, if the new stock is issued at a higher price, the dilution is mathematic but not economic. Though an investor holds a smaller percentage of the ownership, the value goes up because of the new price and the company has more cash on the balance sheet. When the stock is issued at a lower price, the opposite happens. The value is diluted economically and mathematically.

If you need help with understanding your investor rights, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.