11th ACG Cross Training Seminar

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11th ACG Cross Training Seminar
Depository Model
3rd 4th July 2009
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 Malaysias 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. It is your responsibility to verify
any information before using or relying on it.
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AGENDA

• Introduction
• Legal Framework
• Duties of Bursa Malaysia Depository
• CDS Users
• Account Structure
• Difference Between Direct Indirect CDS Account
• Merits For Direct Indirect CDS Account
• Demerits of Direct Indirect CDS Account
• Depositories Services

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DEPOSITORY MODEL
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INTRODUCTION

• Bursa Malaysia Depository Sdn Bhd was established
  in April 1990 and commenced operations in
  November 1992
• Wholly-owned subsidiary of Bursa Malaysia Berhad
• Authorised capital of RM50 million and paid up
  capital of RM25 million
• Completed immobilization of all equities
  non-equities securities listed on the stock
  exchange in June 1997

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DEPOSITORY MODEL
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LEGAL FRAMEWORK

• Securities Industry (Central Depositories) Act
  1991 SICDA.
• SICDA empowers the Central Depository to draw up
  the rules
• of Bursa Malaysia Depository and the issuance
  of any directions.
• Bursa Malaysia Depository Nominess Sdn Bhd is
  deemed as a bare trustee
• Share registrar to issue certificate in the name
  of Bursa Malaysia Depository Nominees Sdn Bhd
• Undeposited securities not to be traded on stock
  exchange or utilised to settle market trade

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DEPOSITORY MODEL
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SALIENT FEATURES IN CDS

• Account maintained at client level and must be
  under the name of beneficial owner or Authorised
  Nominees name.
• Account are tagged with Stock Broker where the
  account was opened
• Mandatory deposit - 100 immobilisation rate
• Transfer of Securities within the Approved
  Reasons to Transfer
• No Withdrawal of securities

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DEPOSITORY MODEL
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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

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CDS USERS
Bursa Malaysia Securities Berhad
Bursa Malaysia Securities Clearing Berhad

• Record of Depositors
• Corporate Exercise

• Allotment Details
• Certificate in the name of Bursa Malaysia
  Depository Nominees Sdn Bhd

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DEPOSITORY MODEL
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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.

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DEPOSITORY MODEL
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DIFFERENCES BETWEEN DIRECT INDIRECT ACCOUNT
Direct Account Indirect Account
Account holder open the account with the Brokers i.e. ADA under his name directly i.e. John Smith 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 direct account, the account holder is the owner of the securities in the CDS account. The depositor will be registered as the shareholder 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.
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DEPOSITORY MODEL
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DIFFERENCES BETWEEN DIRECT INDIRECT ACCOUNT
Direct Account Indirect Account
Dividend entitlement will be directly mailed to the depositor, while entitlement in shares will be credited directly to the account Dividend entitlement will be received by the nominee company that in turn will redirect these entitlement to the beneficial owner
Account opened for its own investment and deal with securities using this direct account Account opened for the following purpose custodian margin or loan facilities purpose
Requires supporting documents for opening of direct CDS account Does not require extensive supporting document
The depositor is the operator of the account The nominee company is the operator of the account
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DEPOSITORY MODEL
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MERITS OF DIRECT INDIRECT ACCOUNT
Direct Account Indirect Account
Depositors are in a principal relationship with Bursa Depository Confidentiality of depositor shareholdings is protected whereby depositors 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 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
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DEPOSITORY MODEL
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MERITS OF DIRECT INDIRECT ACCOUNT
Direct Account Indirect 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
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DEPOSITORY MODEL
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DEMERITS OF DIRECT INDIRECT ACCOUNT
Direct Account Indirect 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 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
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DEPOSITORY MODEL
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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.
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DEPOSITORY MODEL
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DEPOSITORYS SERVICES

• Core services provided are as follows-
• Account openings
• Deposit of securities
• Transfer of securities
• Withdrawal of securities
• Initial Public Offerings (IPOs)
• Corporate exercises

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THANK YOU
If you need further information or clarification
please contact the following

• Zailan Azhar Baharin
• Bursa Malaysia Berhad
• 2nd Floor, Exchange Square
• Bukit Kewangan
• 50200 Kuala Lumpur
• Tel [phone]
• Email zailan_at_bursamalaysia.com
• Website www.bursamalaysia.com

DEPOSITORY MODEL
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DEPOSITORYS SERVICES
DEPOSITORY MODEL
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DEPOSITORYS SERVICES

• Account Management
• Balance Enquiry , Enquiry by Name, Enquiry by
  investors ID
• Updating of CDS Account Particulars
• Suspension/Release Suspension of Account,
  particular stock or certain balances in CDS
  account
• Closing of Account
• Consolidation of Statement of Account
• Inactive / Dormant Account
• Ad-hoc Statement of Account / Monthly Statement
• End of Day Processing will generate notices to be
  mailed to the relevant depositor on changes to
  their account particulars / suspension/release
  suspension / changes in their account status

DEPOSITORY MODEL
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DEPOSITORYS SERVICES
DEPOSITORY MODEL
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DEPOSITORYS SERVICES

• Deposit of Securities
• Provisional credit is accorded on deposit day
  itself
• Depositor able to utilise the provisional credit
  for trade settlement during prescribed period of
  1 month
• Registrar will authenticate the certificate
  deposited and revert to Depository within 7
  market days
• End of Day processing will generate notices to
  depositor in event any deposit is rejected

DEPOSITORY MODEL
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DEPOSITORYS SERVICES
DEPOSITORY MODEL
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DEPOSITORYS SERVICES

• Transfer of Securities
• Transfer of securities is real time
• Transfer must be within the Approved Reasons for
  Transfer
• Exception reports are generated to monitor
  transfer in CDS
• End of Day Processing will generate notices to
  the relevant transferors and transferees

DEPOSITORY MODEL
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DEPOSITORYS SERVICES
DEPOSITORY MODEL
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DEPOSITORYS SERVICES

• Withdrawal of Securities
• Only permitted for Delisted securities
• Certificate will be issued and mail directly to
  the depositor within 14 market days by the share
  registrar
• End of processing will generate notices to the
  relevant depositors on the successful withdrawal
  request

DEPOSITORY MODEL
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DEPOSITORYS SERVICES
DEPOSITORY MODEL
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DEPOSITORYS SERVICES

• Initial Public Offerings (IPOs)
• Mandatory to have a CDS account to participate in
  Initial Public Offerings
• Apply an IPO by completing the prescribed
  Application Form or via Electronic Share
  Application (ESA) or via Internet Application
• ESA able to apply via Automated Teller machine
• CDS account of successful applicant will be
  credited 2 market days before listing

DEPOSITORY MODEL
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DEPOSITORYS SERVICES
DEPOSITORY MODEL
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DEPOSITORYS SERVICES

• Corporate Action
• Bursa Depository provide Record of Depositors
  (ROD) as at book closure date of a corporate
  action to issuer/share registrar to ascertain the
  entitlement to be distributed
• All entitlement in shares to be credited to the
  depositors account
• Dividend is distributed to share holder by the
  registrar/issuer by mailing to them or crediting
  their bank account

DEPOSITORY MODEL