Move to boost use of broker custody accounts among retail investors in Singapore
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SGX RegCo noted that retail investors also have the option to keep their CDP direct accounts if they do not want to move to the broker-custodian model.
ST PHOTO: KUA CHEE SIONG
SINGAPORE – Retail investors here who currently hold Singapore-listed stocks in their Central Depository (CDP) accounts will soon be able to hold and view these together with their foreign-listed stock holdings in a custodian account with their broker if they so choose.
This proposal, which could take effect as early as June, allows them to manage all their investments in one place, boosting ease and convenience.
Singapore Exchange Regulation (SGX RegCo) is seeking public feedback on proposed rule amendments to facilitate the wider use of broker custody accounts in the Singapore market.
Brokers and depository agents like Tiger Brokers, Moomoo and Interactive Brokers maintain their clients’ securities in broker custody accounts/custodian accounts under their names with the CDP.
Currently, some retail investors here already hold their Singapore-listed and foreign-listed stocks in these broker custody accounts.
Other investors hold their Singapore-listed equities in individual direct accounts with the CDP and overseas-listed securities in these broker custody accounts.
SGX RegCo noted in its statement on Jan 30 that about two-thirds of retail accounts in the CDP are individually segregated direct accounts, which are held by retail investors under their own name.
The remaining one-third are in broker custody accounts, it added.
The proposed broker custody model is the main model in major markets and would align the Singapore Exchange (SGX) with international practice, where investors hold securities with brokers in pooled accounts.
The Straits Times understands that besides Singapore-listed equities, retail investors can move their Treasury bills, Singapore Government Securities and retail bonds like the Astrea series of private equity bonds to the broker custody accounts. The only exception is Singapore Savings Bonds, which will remain in their CDP accounts.
SGX RegCo noted that retail investors also have the option to keep their CDP direct accounts if they do not want to move to the broker custodian model.
Mr Ng Yao Loong, head of equities at SGX Group, said it is timely for a wider adoption of the broker custody model at this stage.
He added that there are mutual benefits for investors and brokers.
Investors can consolidate all their overseas and local investments with a single broker and tap value-added services, such as customised investment insights and portfolio management.
Brokers will be able to offer portfolio management services because they hold the stocks in custody and thus can manage investments on behalf of their clients more easily.
Mr Ng said: “This streamlined experience supports more active investor engagement, while giving brokers greater ability to offer more value-added services and strengthen their client relationships.”
Mr Luke Lim, chairman of the Securities Association of Singapore, said that under a broker custody model, brokers have clearer visibility of client holdings and transactions. This allows them to monitor trades and keep clearer records of ownership.
He added that brokers will have greater autonomy to streamline custody and operational processes. This can improve efficiency and service standards, all while maintaining strong investor protection.
Ms Evy Wee, regional head of wealth platforms and solutions at DBS, said the proposed amendments will mean that customers can safekeep all their Singapore and overseas investments with the bank.
“A complete and timely investment portfolio view is key to helping investors make better decisions around diversification,” she said.
Ms Wee added that if approved, the amendments alongside other initiatives will hopefully encourage greater participation in Singapore’s equities markets, whether through direct investing or other investment solutions such as digital portfolios.
SGX RegCo noted that the move towards a broker custodian model dovetails with initiatives to encourage greater participation by internationally active asset managers and will enhance Singapore’s competitiveness as a trading and investment hub.
These asset managers are used to omnibus structures in other major markets but must maintain a separate system of working here.
Aligning with the omnibus approach will make it easier for them to enter and participate more actively in Singapore’s stock market, the regulator noted.
Mr Tan Boon Gin, chief executive of SGX RegCo, said that even as the SGX modernises its market infrastructure, it has to ensure that the standards of the custody framework remain robust.
SGX RegCo is thus consulting on the following rule amendments to support a smooth transition to the broker custody model:
Introducing measures to ensure brokers and depository agents keep client assets and monies safe.
Requiring those who operate broker custody accounts to ensure that clients can exercise their shareholder rights. This is because when the shares are held in a broker custody account, the ownership is held through the broker. Thus, shareholders will need to rely on their broker to inform them of any shareholder meetings or important developments. Shareholders have rights like attending meetings and corporate action events such as a rights issue; calling meetings to propose resolutions such as appointment or removal of certain directors; and receiving dividends.
Enhancing the regulatory framework for depository agents so that there is tighter regulatory oversight. This includes more powers for the CDP to inspect, investigate and take action against depository agents for regulatory lapses.
Mr Tan said: “Our proposals seek to provide strong assurance on the integrity of the operational and custody processes that intermediaries employ to service investors.
“More consistent and reliable processes across the industry will support wider adoption of the broker custody model and ultimately contribute to a more dynamic and competitive stock market.”
Mr Ang Hao Yao, vice-president of the Securities Investors Association (Singapore), or SIAS, said regulations have to be tightened since brokers will have more access to clients’ information now. Areas like personal data protection and cybersafety could be addressed to maintain the trust between investors and brokers.
He added that SIAS would like regulators to ensure that the omnibus arrangement is as secure as holding stocks under the CDP. This is because with the CDP, shares are held directly under an investor’s name so even if the broker goes bankrupt, the shares are still safe in his CDP account.
It is also important that investors continue to enjoy convenient access to shareholder meetings, voting rights, and participation in corporate actions, Mr Ang said.
The consultation is found here
