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Direct or Nominee CDS Account?

Direct CDS or Nominee CDS account?

When stock investment was first started, a buyer will receive a share certificate when he done a transaction. Literally, that was a piece of paper stating that you own certain numbers of shares of a company. However, cases such as misplaced of certificate, bite by insect or even fire tragedy had made the identification of ownership to be difficult.

Consequently, CDS (Central Depository System) was introduced to replace the conventional system. Now, any transaction done by investors will electronically be recorded by CDS system, simple and quick.

Back to the topic, if you want to start investing, you must have a CDS account. Generally, there are two types of CDS account, which are direct CDS account and nominee CDS account. The characteristics of each are shown as below:
Direct CDSNominee CDS
Account nameDirectly under shareholder name (eg Mr XXX)Under broker name (eg RHB Capital Nominees (Tempatan) Sdn Bhd for  Mr XXX)
Initial Public Offering (IPO)Eligible to apply for IPONot eligible
DividendBank in to shareholder account directlyBank in to bank trust account with service charge
Paperwork on Corporate ActionDone by shareholder himselfDone by broker with service charges
Annual ReportAutomatically mail to shareholderUpon request from broker
Attending AGMEligibleEligible with bank consent letter
Share transferMay transfer to own and relative accountTo only your own account
Cash Balance Interest RateInvestment bank saving rate (usually higher)Bank saving account rate


All in all, direct CDS account is handled by shareholder him/herself. He has more freedom and power in controlling his portfolio. For instance, he could directly obtain information such as annual report from the company and he could apply for initial public offering. Another advantage is dividend can be received without being charged by the broker. The only insignificant setback is shareholder might need to handle paperwork himself. 

Personally, I prefer Direct CDS account as it brings more benefits.

Reminder: Remember to tell your broker that you opt for a Direct CDS account, as the nominee account is in default.

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