Transcript Slide 1
Bursa Malaysia Depository Sdn Bhd
ACG CROSS TRAINING
Merits and Demerits of Direct and Indirect Account Method 27th & 28th June 2006
Bursa Malaysia and its Group of Companies (“Bursa Malaysia”) reserve all proprietary rights to the contents of this Presentation. No part of this Presentation may be used or reproduced in any form without the Bursa Malaysia’s prior written permission. This Presentation is provided for information purposes only. Neither the Bursa Malaysia nor the Presenter make any warranty, express or implied, nor assume any legal liability or responsibility for the accuracy, completeness or currency of the contents of this Presentation.
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AGENDA
• Introduction
Bursa Malaysia Depository Sdn Bhd - CDS Users - Benefits of CDS Depository’s Services - Account Structure - Account Status - Statistic
• Differences Between Direct & Indirect Account • Merits of Direct & Indirect Account • Demerits of Direct & Indirect Account
INTRODUCTION
BURSA MALAYSIA DEPOSITORY SDN BHD
In November 1992 Bursa Malaysia Depository Sdn Bhd (formerly known as Malaysian Central Depository Sdn Bhd) began providing the Central Depository System (CDS) to the investing public through the opening of CDS accounts.
It was a system designed to revolutionise the securities industry in Malaysia.
CDS USERS
Provides depository services to the following users through the Central Depository System (CDS):-
Authorised Depository Agent (ADA) Authorised Direct Member (ADM) Issuer Issuing house Share registrar Account holder / depositor Clearing House
BENEFITS OF CDS
Increased efficiency – Via a computerised book entry system, it has improved the efficiency of securities transactions e.g. on-line transfer of securities
Increases the capacity of clearing and settlement of securities
Reduces settlement risk - eliminate lost, fraud or misplaced certificate
Automatic registration - save time and costs
DEPOSITORY’S SERVICES
Core services provided are as follows:-
Account openings
Deposit of securities
Transfer of securities
Withdrawal of securities
Book-entry settlement
Initial Public Offerings (IPOs)
Corporate exercises
Provision of information
ACCOUNT STRUCTURE
Direct Account :
held directly in the name of individual, corporate body, institutional investors and etc.
Indirect Account :
held in the name of nominees where the beneficial owner details are captured one nominee account one beneficial owner nominees account can only be opened by Authorised Nominees i.e. bank/ broker/trust companies Certain relaxation was introduced whereby nominee company can operate omnibus account effective 21 October 2005.
ACCOUNT STATUS
Active Account :
Accounts having transaction or balance for the last 3 years.
Inactive Account :
Accounts with balance but without any transaction for the last 3 years.
Dormant Account :
Account without balance and transaction for the past 3 years.
STATISTIC AS AT 31 MAY 2006
No. of Participants Authorised Depository Agent (ADA) Authorised Direct Member (ADM) - 37 - 27
No. of Participants Branches Authorised Depository Agent (ADA) Authorised Direct Member (ADM) - 127 - 1
No. of CDS Accounts
No. of Indirect CDS account No. of Direct CDS account - 3.54 million - 0.56 million - 2.98 million
DIFFERENCES BETWEEN DIRECT & INDIRECT ACCOUNT
Direct Account Account holder open the account with the Brokers i.e. ADA under his name directly i.e.
John Smith
In direct account, the account holder is the owner of the securities in the CDS account. The depositor will be registered as the shareholder Indirect Account Depositor open the account with Custodians Bank or Brokers under the name of a nominee company with the depositors as the beneficial owner i.e.
ABC Nominees (Tempatan) Sdn Bhd For John Smith
In indirect account, the nominee company is the owner of the securities in the CDS account. The name of the nominee company will be registered as the shareholder.
DIFFERENCES BETWEEN DIRECT & INDIRECT ACCOUNT
Direct Account Dividend entitlement will be directly mailed to the depositor, while entitlement in shares will be credited directly to the appropriate account Account opened for its own investment and deal with securities using this direct account Requires supporting documents for opening of direct CDS account and subsequent operating process The depositor is the operator of the account Indirect Account Dividend entitlement will be received by the nominee company that in turn will redirect these entitlement to the beneficial owner.
Account opened for the following purpose : 1. custodian 2. margin or loan facilities purpose Does not require extensive supporting document The nominee company is the operator of the account
MERITS OF DIRECT & INDIRECT ACCOUNT
Direct Account • Depositors are in a principal relationship with Bursa Depository • Confidentiality of depositor shareholdings is protected whereby depositor’s share holding is not known to third party • The ownership of CDS account is transparent • The asset of depositor and stockbroker i.e. ADA is clearly segregated • Depositor received his/her annual reports or dividends payout directly from the registrar/issuer Indirect Account • Lesser documentation to operated such account • Do not require to be present in person to perform depository transactions • Cost savings to Bursa Depository arising from the following : - storage cost due to less documentation to stored - postage and other related stationeries on mailing of statements/notices as these notifications are send electronically to nominee company
MERITS OF DIRECT & INDIRECT ACCOUNT
Direct Account • The depositors shareholdings is unaffected in the event the brokers is declared bankrupt • Depositors received notification directly from Bursa Depository in the event of any changes to its account particulars or movement of securities • CDS statement of account are issued directly to the depositor Indirect Account
DEMERITS OF DIRECT & INDIRECT ACCOUNT
Direct Account • More documentation to operate such account • To be physically present in person to perform depository related transactions • Higher operational and maintenance cost for Bursa Depository : - storage cost for storing documents - postage and stationeries cost for sending out statements and notices to depositors Indirect Account • The nominee company is in a principal relationship with Bursa Depository and the beneficial owner details are merely for information • Depositor shareholding is known to third party • Depositor do not receive any notification or CDS statement of account directly from Bursa Depository • Delay in receiving dividend entitlement • Does not receive notification or annual report directly from the Issuer
DEMERITS OF DIRECT & INDIRECT ACCOUNT
Direct Account Indirect Account • Incurred additional cost for services provided by the nominee company • Implication to depositor shareholdings if the nominee company is declared bankrupt • Ownership of account is not very clear.