Using a nominee company

Increasingly, investment managers (whether providing execution-only, advisory or discretionary services) insist that investors hold their investment portfolios through the investment manager's nominee company rather than in certificated form. But what exactly is the legal and tax position of such an arrangement and is it a time bomb waiting to explode? The acts of an investment manager in respect of an investment portfolio held by themselves as nominee are treated as the acts of the investor, the principal. As nominee, the investment manager is a mere passive repository of the portfolio...