Transcript Slide 1

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 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.
It is your responsibility to verify any information before using or relying on it.
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
DEPOSITORY MODEL
Page 2
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
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
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
DEPOSITORY MODEL
Page 5
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
DEPOSITORY MODEL
Page 6
CDS USERS
Bursa Malaysia
Bursa Malaysia Securities
Clearing Berhad
Securities Berhad
• Record of Depositors
• Corporate Exercise
• Allotment Details
• Certificate in the name of Bursa Malaysia Depository
Nominees Sdn Bhd
DEPOSITORY MODEL
Page 7
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.
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.
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 :
1. custodian
2. 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
DEPOSITORY MODEL
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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
DEPOSITORY MODEL
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
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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
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
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.
DEPOSITORY MODEL
Page 14
DEPOSITORY’S SERVICES
Core services provided are as follows:-
DEPOSITORY MODEL

Account openings

Deposit of securities

Transfer of securities

Withdrawal of securities

Initial Public Offerings (IPOs)

Corporate exercises
Page 15
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: 603-2034 7750
Email: zailan@bursamalaysia.com
Website : www.bursamalaysia.com
DEPOSITORY MODEL
DEPOSITORY’S SERVICES
Opening of Individual & Corporate
CDS Accounts
DEPOSITORY MODEL
DEPOSITORY’S SERVICES
Account Management

Balance Enquiry , Enquiry by Name, Enquiry by investor’s 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
DEPOSITORY’S SERVICES
Deposit – Acceptance and Rejection
DEPOSITOR
DEPOSITORY MODEL
DEPOSITORY’S 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
DEPOSITORY’S SERVICES
Transfer – Acceptance and Rejection
DEPOSITOR
DEPOSITOR
DEPOSITORY MODEL
DEPOSITORY’S 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 transferor’s
and transferee’s
DEPOSITORY MODEL
DEPOSITORY’S SERVICES
Withdrawal of Securities
Withdrawal request
DEPOSITOR
Document
ADA
Ack.
Confirm/
Reject
CD
Confirmation
Withdrawal Notice from
Bursa Malaysia Depository Sdn Bhd
Deliver Certificate in depositor’s name
DEPOSITORY MODEL
Registration
Registrar
DEPOSITORY’S 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
DEPOSITORY’S SERVICES
Initial Public Offerings (IPOs)
APPLICANT
Submit
application
BURSA
DEPOSITORY
ISSUING
HOUSE
Submit detail of
successful applicant
Rectify &
Resubmit
no
Verify details
yes
mail notice of allotment to
successful applicant
DEPOSITORY MODEL
ISSUING
HOUSE
confirmation
Credit the
applicant’s
CDS account
DEPOSITORY’S 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
DEPOSITORY’S SERVICES
Corporate Action
Provide ROD
BURSA
DEPOSITORY
SHARE
REGISTRAR
will mail entitlement
i.e. dividend
SHAREHOLDER
ACCOUNT HOLDER
for entitlement in shares i.e.
Bonus/Rights, submit details to
Bursa Depository
Verify details
no
Rectify &
Resubmit
yes
Credit into CDS
account
DEPOSITORY MODEL
confirmation
SHARE
REGISTRAR
mail notice of allotment to
successful applicant
DEPOSITORY’S 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