Here is your answer:LOOPHOLES exist within Australia's...

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LOOPHOLES exist within Australia's off-market transfer system that allow a budgerigar named Bud Gerigar to own a share portfolio, but at least you can't criticise Computershare for not acting fast to correct the blunder.

The Age - 18/11/2008

LOOPHOLES exist within Australia's off-market transfer system that allow a budgerigar named Bud Gerigar to own a share portfolio, but at least you can't criticise Computershare for not acting fast to correct the blunder.

Within hours of BusinessDay hitting the streets with news that Mr Bud Gerigar of Melbourne owned one share in Downer EDI, share registry operator Computershare reversed the off-market transfer, effectively returning our budgie's share to its original owner. But Computershare readily admits that if BusinessDay hadn't come clean about its budgie shenanigans, we'd still own the share today.

"The story put us on notice that a transfer had taken place to a fictitious person," Computershare group regional director Mark Davis said. "We were then obliged to nullify the transaction, to correct the share register of the company concerned."

Because BusinessDay's budgie stopped at one off-market transfer, Computershare was allowed to reverse the transfer. Had the share been transferred to other false names - for example, Parry Keet, then to Oz Trich and Maggie Pie - Computershare would have been powerless to investigate.

"That's right," Mr Davis said, "it's only because you at The Age pointed out that there was a bird sitting on the share register. What do you do? We were put on notice. If the shares had of been sold ... or transferred to other names, then we would have been powerless."

And there lies a glaring flaw in the nation's share ownership regulations - and one that Treasury and regulators have been aware of for more than a year.

So far, the Minister for Superannuation and Corporate Law Nick Sherry has been unwilling to comment on the off-market transfer of shares into false names, and the potential for fraud to take place.

BusinessDay's pet budgie is shareless again, but Mr Davis is hopeful it has highlighted serious flaws in the nation's off-market transfer system. He said: "Computershare deals in markets all over the world and Australia has one of the best regulated sharemarkets in the world, we stand by that, but there's no doubt there is an issue with the off-market transfer system in this country."

Computershare concedes that Bud Gerigar's purchase is one of very few transfers it has had to reverse.

That is surprising, given that there are more than 100 million equity trades on the ASX each year, including "tens of thousands of off-market transfers", according to Mr Davis.

Under the existing system, the chances of regulators or the Tax Office catching out a share transfer into a false name is remote.

Computershare is paid a fee for each shareholder recorded on a company's share register. That includes a nominal payment for those who have sold their shares and are recorded as "nil holders".

For most clients, Computershare annually purges the names of nil holders from the register and archives that information. This process is called a "nil holder drop", and is done to reduce costs for clients.

Sadly for the Tax Office, until the turn of the millennium, the favoured archive medium for a nil holder drop was microfiche. Since 2000, the storage medium has been computer disk.

"It's archived in a text file format with no proper record structure," a former Computershare staffer said. "Basically, a dump of what would have printed out on a line printer."

Bud Gerigar's name will end up on such a list of nil holders. So will fake names used by criminals to hide share holdings. Such criminals are ultimately aided by a storage system that makes searching and cross-referencing of names impossible for either the Tax Office or regulators.