What is CDS Account?？

CDS is the abbreviation of Central Depository System (Central Depository System), which is an electronic stock storage system owned and operated by Bursa Malaysia Depository Sdn Bhd (Bursa Malaysia Depository Sdn Bhd), which electronically records the trading of securities and the holding of shares on the Bursa Malaysia Exchange.。

Traditionally, buying shares of a listed company receives a paper-based entity share certificate (Stock Certificate) issued by the company, which records the nature of the stock, the price, the number, the name of the issuing company, and the signature of the chairman.。

However, with the electronic clearing and settlement of securities transactions, stock transactions and equity transfers have shifted to paperless, no longer issuing physical certificates, but to Bursa Malaysia Depository, a Malaysian securities depository, to send electronic share certificates to investors in the form of electronic records and e-mail after each transaction.。

Simply put, CDS is the central electronic system responsible for the settlement and clearing of securities transactions, as well as securities custody services.。All buy and sell transactions made on the Malaysian Exchange will be electronically recorded in the CDS and not with the brokerage。

Therefore, any intention to trade Malaysian shares must open an account in the CDS through an authorized depository agent (ADA) to facilitate the deposit or deduction of the corresponding securities in the direction of the buyer and seller.。ADA is also a brokerage firm, the shares bought by the investor will be deposited in the CDS account has been opened, after the sale of the deduction.。

Types of CDS Account

There are two main types of CDS central deposit accounts: Direct CDS Account and Nominee CDS Account.。

If you already have a CDS account but are not sure you have a Direct CDS Account or Nominee CDS Account, it is recommended to check directly with the broker。

Theoretically, an individual investor can open a CDS account at each ADA, meaning that you can hold a separate CDS account and a securities account at the same time at Rakuten Trade, CIMB, M + Online, but you cannot hold two or more CDS accounts at the same time at Rakuten Trade.。

The difference between the two

Although both Direct CDS Account and Nominee CDS Account are CDS accounts, they differ in terms of share equity and flexibility of account use.。

holders of shares

The right to hold shares is the biggest difference between Direct CDS Account and Nominee CDS Account.。

Direct CDS Account holds shares in your own name and your name will be legally registered as a shareholder of a listed company; Nominee CDS Account holders are brokerage firms。

In other words, the broker as the nominee (authorized nominee) will hold the company's shares on your behalf, and you are the beneficiary owner of those shares (beneficial owner)。

Suppose that one day the brokerage unfortunately goes bankrupt and the shares held by Direct Account will not be affected in any way because they are in your personal name.。You can sell your shares at any time through another brokerage firm; however, as a holder of Nominee Account, your stock assets will theoretically remain in the Bursa Malaysia Depository system, but you must apply to transfer your shares from one CDS account to another。

Dividend Payments

Direct Account holders will receive cash dividends distributed by listed companies on the payment date (Payment Date) and deposit them into their personal bank accounts;

Conversely, dividends from Nominee Account will be collected by the brokerage firm, as the holder of Nominee Account is the brokerage firm, and after the dividends are paid to the brokerage firm, the brokerage firm remits them to the beneficiary's (i.e., you) personal bank account, typically with a delay of 3 to 5 business days before receiving the cash dividends。Some brokerages will levy administrative fees.。

Subscription for initial public offering

For initial public offerings (IPOs), Direct Account may apply for new IPO shares, but Nominee Account may not apply for new IPO shares。

Attendance at Annual General Meeting and Financial Report

With a Direct Account, you will automatically receive a notice of the annual general meeting (AGM) of the listed company and the company's financial results, and you can choose whether to attend AGM or not.。

However, Nominee Account holders will not receive the annual report or AGM notice because technically the broker is the shareholder and therefore the relevant notice will be sent directly to the broker。If you want to attend AGM or EGM, you need to be authorized by a broker.。

Dealing with corporate activities

Listed companies sometimes engage in special corporate activities, such as the issuance of additional shares, dividend reinvestment plans, etc. Direct Account holders must process the application in person and cannot participate if they miss the application date.。

Nominee Account holders, on the other hand, only need to inform the broker of their intention to participate and pay a fee, leaving everything to the broker, which is more time-saving and convenient.。

Commission

Many Nominee Account brokers offer relatively lower stock commission rates, such as Rakuten Trade, which offers the lowest commissions in Malaysia.。

stock transfer

Direct Account holders can transfer their equity assets to third parties at any time, as all shares are held in their personal name in the Bursa Malaysia Depository system.。

However, if you buy shares with Nominee Account, the equity assets are held by the broker on your behalf and therefore can only be transferred to your own CDS account in the name of another broker and cannot be transferred to others。

How to open a CDS Account？

The process of opening a CDS account is simple:

• Direct CDS Account or Nominee CDS Account
• Select the authorized depository agent (ADA) that provides this CDS Account type, the so-called brokerage / investment bank.
• Complete CDS Account Form
• Submit the form with a copy of the ID card to the broker and pay the CDS account opening fee

As long as you are over 18 years old, you can open a CDS account.。The general brokerage / investment bank will apply for a CDS account on behalf of the securities account (Brokerage / Trading Account) account opening process, CDS account opening fee is RM10.。