Depository & Nominee Services Hong Kong Securities Clearing Company Limited 3rd July 2009 11th ACG...

DepositoryDepository & Nominee Services & Nominee Services

Hong Kong Securities Clearing Company LimitedHong Kong Securities Clearing Company Limited

3rd July 20093rd July 2009

11th ACG Cross Training Seminar11th ACG Cross Training Seminar

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AgendaAgenda

• Background• Introduction to the CCASS Depository• Deposit of Securities• Withdrawal of Securities• Vault Management• Shareholding Structure• Shareholding Disclosure• Introduction to the Nominee Services• Announcement / Communication• Voting• Entitlements / Actions (not requiring / requiring the exercise of

discretion)• Questions and Answers

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BackgroundBackground

• Hong Kong Securities Clearing Company Limited (HKSCC) was incorporated in 1989 and was recognized as clearing house in 1992.

• Central Clearing and Settlement System (CCASS) was launched by HKSCC in 1992.

• Merged with The Stock Exchange of Hong Kong Limited (SEHK), Hong Kong Futures Exchange Limited (HKFE), The SEHK Options Clearing House Limited (SEOCH), HKFE Clearing Corporation Limited (HKCC) in 2000; and became a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx).

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• CCASS is based on the immobilisation of share certificates in a central depository operated by HKSCC.

• Physical certificates being deposited into CCASS become immobilised and are transformed into electronic records to effect settlement.

• All shares of the same stock held in the CCASS Depository are fungible, and not earmarked for a particular participant or transaction.

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Screening & verifyingCredit to CCASS Stock A/C

+

Depositor ensures good title

Re-registered share certificates in the name of HKSCC Nominees Limited

DepositOrder Form

StockCerts

CCASS Depository

• Immobilisation flow:

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Introduction to Introduction to the CCASS Depositorythe CCASS Depository

• The physical site:

– Situated at 2/F Vicwood Plaza, Sheung Wan;

– Facilities include a service counter hall and a vault with capacity for over 15 million share certificates;

– Equipped with Burglar Alarm System and guard services around the clock.

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• The physical site:

– Service hours of the CCASS Depository:-• Monday to Friday (except public holidays)

– For the deposit of securities:- 10:00 am to 3:45 pm;

– For the collection of securities:- 10:00 am to 5:00 pm.

– If the usual premises of the CCASS Depository become unavailable or unsuitable for providing services to participants, HKSCC will use its back-up premises situated at 8/F Chinachem Centre, Quarry Bay to continue CCASS Depository services.

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• Role of the Depository:

– Offers physical shares deposit for either settlement or custody purpose;

– Offers physical shares withdrawal services;

– Furnishes with custodial services to safe keep shares deposited;

– Provides nominee services (e.g. dividend distribution, entitlement election, voting, subscription, etc.) in respect of shares held in the depository.

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– Ordinary shares

– Preference shares

– Registered warrants

– Provisional allotment letters relating to nil paid rights

– Debt securities

– Units

– Structured products

– Depositary receipts

• Eligible securities held in the CCASS Depository:

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• Securities under CCASS custody as of end of December 2008:

– No. of physical certificates (Million) : 6.34

– No. of shares (Billion) : 3,408.32

– % of issued shares of admitted securities : 72.57

– Market value (HK$ Billion) : 5,040.54

– % of market cap. of admitted securities : 44.62

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Deposit of SecuritiesDeposit of Securities

• This service is available to :– Direct Clearing Participants

– General Clearing Participants

– Custodian Participants

– Investor Participants

• Securities are deposited for either settlement or custody purpose.

• CCASS Participants are responsible to HKSCC for the good title of the securities they deposit into CCASS.

• HKSCC has no proprietary interest in the securities deposited into CCASS.

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Deposit of Securities –Deposit of Securities – Procedures for DepositProcedures for Deposit

Share

certificate

+Stock Deposit Form

Participants must ensure that they have full authority to deposit such securities into CCASS.

2. Inspect all the documents submitted.3. Input the deposit details to

CCASS.

10:00 a.m. to 3:45 p.m. Monday to Friday

CCASS Depository

4. Immediately credit to Participant’s stock account.

Instrument of Transfer

5. Share certificates will be delivered to the share registrar for re-registration in name of HKSCC Nominees Limited. This process will take 10 business days.

6. After 10 business days

New share

certificate

１ .

Share Registrar

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Deposit of Securities –Deposit of Securities – Procedures for DepositProcedures for Deposit

Specimen

Specimen

Specimen

Specimen

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Deposit of Securities –Deposit of Securities –Void TransactionsVoid Transactions

• A deposit transaction may be subsequently voided due to (but not limited to) the following reasons: – Rejection for re-registration by the share registrar (for reason

of incorrect transferor’s signature);

– Lost certificates.

• Previous credit entries will be reversed. Share quantities will be debited from the depositing participant’s stock account with CCASS.

• Cash collateral may be collected on negative stock balances resulted from the reversal of the credit entries.

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Withdrawal of SecuritiesWithdrawal of Securities

• This service is available to :

– Direct Clearing Participants

– General Clearing Participants

– Custodian Participants

– Investor Participants

– Stock Pledgee Participants (with limited rights of withdrawal of securities from CCASS)

• The share quantity to be withdrawn can be in board lot or odd lot size.

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Withdrawal of Securities –Withdrawal of Securities – Procedures for WithdrawalProcedures for Withdrawal

Participants input withdrawal order (W/O) via CCASS.

Once a W/O is accepted by the system, the Participant's specified stock account will be debited by the system with the withdrawn quantity of shares.

HKSCC staff retrieves the certificates of the withdrawn stock from the vault.

HKSCC staff signs the Instrument of Transfer.

Stock Withdrawal Receipt, certificates and Instrument of Transfer pass to the depository counter.


CCASS Depository

2.

3.

4.

5.

The authorized representative of the Participant with the duly signed Stock Collection Authorization Form can collect the Certificates from the counter.

6.


1.

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Withdrawal of Securities –Withdrawal of Securities – Procedures for WithdrawalProcedures for Withdrawal

Specimen

Specimen

Specimen

Specimen

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Vault ManagementVault Management

• Certificates will be jumbolized in order to reduce the required storage space.

• Certificates will be categorized into Main Vault and Working Vault for better vault management.

• Closely monitor the inventory level to ensure that adequate certificates are available in vault to meet the daily withdrawal demand.

• In case of shortfall, jumbo certificates will be sent to share registrar for splitting.

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Vault ManagementVault Management

• The following major control measures are in place to ensure the data integrity of the vault and the system:

– Depository staff will conduct stock count on share certificates stored in the working vault once a week;

– Staff other than the Depository will conduct stock count of selected stocks in the Main and Working Vault on a daily basis, and will conduct stock count of ALL stocks once a year;

– Internal audit will conduct stock count of selected stocks in the Main and Working Vault on a random basis and at least four times a year;

– Securities and Futures Commission (SFC) will on-site observe the operations of the Depository and to investigate the documentation on ad-hoc basis in order for HKSCC to obtain the status as an approved custodian for the safe custody of client securities for the purpose of section 11 of the Securities and Futures (Client Securities) Rules.

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Shareholding Structure

Register of Members

HKSCC Nominees LimitedIndividual/ Institutional

Registered ShareholdersOther intermediaries /

Nominees

Beneficial Owners

Beneficial Owners

Brokers: Registered Shareholder

Note: Listed company must appoint an approved share registrar to maintain its register of members according to the Companies Ordinance of Hong Kong.

: Ultimate Beneficial owners

CustodianBanks

Investor Participants

Beneficial Owners

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Shareholding DisclosureShareholding Disclosure

• Shares held in CCASS are registered in the name of HKSCC Nominees Limited.

• In quantity terms, over 70% of the shares admitted into CCASS are currently held under CCASS custody.

• HKSCC Nominees Limited appears as a major shareholder on the Register of Members (ROM) of most Hong Kong-listed companies.

• Hong Kong’s Companies Ordinance allows the public to inspect the ROMs of companies but the breakdown of CCASS shareholdings does not form part of the ROMs.

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Shareholding DisclosureShareholding Disclosure

• Give public greater access to information on Hong Kong-listed companies’ shareholdings and further increase the transparency of CCASS shareholdings.

• Online CCASS Shareholding Disclosure service introduced at the end of April 2008.

• Individuals can look up the number of shares held by each CCASS participant free of charge.

• Information on the holdings of Investor Participants who consent to the disclosure is also available in detail, while the holdings of other IP are displayed in aggregate.

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Shareholding Disclosure

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Shareholding Disclosure

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Introduction to the Nominee Introduction to the Nominee ServicesServices

• HKSCC Nominees Limited is a wholly owned subsidiary of Hong Kong Securities Clearing Company Limited, which acts as the common nominee for the shares held in the CCASS Depository.

• Monitor all corporate actions or activities affecting Eligible Securities and to keep Participants informed of all such actions and activities which require Participants to take steps in order to participate in them.

• Provider of nominee services in relation to the four broad categories of corporate actions or activities affecting Eligible Securities. i) announcement / communication ii) voting iii) entitlements / actions (not requiring the exercise of discretion) iv) entitlements / actions (requiring the exercise of discretion)

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Nominee Services –Announcement / Communication

Investor Participants

Beneficial owners

Non-Investor Participants

Listed Company

HKSCC Nominees Limited Other Registered Shareholders

Information dissemination originates from listed company is passed to all registered shareholders including HKSCC Nominees Limited. HKSCC Nominees Limited then passes selected and interpreted information to all Non-IP and IP. Non-IP finally will pass it to the beneficial owners.

Instructions given by beneficial owners / IP to HKSCC Nominees Limited indirectly / directly to receive corporate announcements / communications directly from listed companies

Corporate announcements / communications are passed directly from listed company to beneficial owners by HKSCC Nominees Limited’ s supply of their names and addresses to the listed company

Note: 1. Non-Investor Participants have electronic linkage with CCASS via

CCASS Terminals or Participant Gateway to retrieve corporate announcements information and submit their instruction where required.

2. Investor Participants could access CCASS directly via CCASS Phone system, CCASS Internet System, or Service Counter in person and to submit their instructions.

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Nominee Services –Voting

• Beneficial owners instruct through CCASS Participants to submit instructions to HKSCC Nominees Limited to cast votes on their behalf (i.e. voting instruction), or appoint themselves as corporate representatives of HKSCC Nominees Limited (i.e. corporate representative instruction) to attend and vote at the shareholders’ meetings.

• Proxy: For those meetings which are held overseas or multiple corporate representatives are not permitted according to listed companies’ memorandum and articles of associations, chairman of these meetings will be appointed as proxy to vote on behalf of the beneficial shareholders.

• Corporate Representative: For those meetings which are held in Hong Kong, our staff and/or beneficial shareholders will be appointed as corporate representatives of HKSCC Nominees Limited.

Listed Company

HKSCC Nominees Limited

Non-Investor Participants Investor Participants

Beneficial Owners

Corporate Representative

instruction &/or voting

instruction



instruction



instruction

Proxy form or Corporate Representative Appointment

letter

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Nominee Services –Entitlements / Actions (not requiring the exercise of discretion)

• Benefit Entitlements / Corporate Actions (not requiring the exercise of discretion) e.g. dividend payment without election / issue of bonus shares.

• Upon receipt of payment / bonus shares in respect of HKSCC Nominees Limited’s shareholding as at the record date, HKSCC will credit the payment/ bonus shares to CCASS participants’ bank account / stock account respectively.

• Credit scrip entitlement to participants' stock accounts on batch mode basis.

Listed Company


Beneficial owners

Dividend / Bonus shares





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Nominee Services –Entitlements / Actions (requiring the exercise of discretion)

• Benefit Entitlements / Corporate Actions (requiring the exercise of discretion) e.g. dividend payment with election, open offer, take-over offer, subscription.

• HKSCC Nominees Limited will collect instructions from CCASS Participants and take action on their behalf or to facilitate the taking of actions by Participants directly.

• Allow participants to amend authorised instructions before CCASS deadline.

Listed Company


Beneficial Owners

Subscription, Take-over instruction

Expenses, shares,Form of

Acceptance

Entitlement / shares







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Questions and AnswersQuestions and Answers

Thank YouThank You

www.hkex.com.hkwww.hkex.com.hk

Depository & Nominee Services Hong Kong Securities Clearing Company Limited 3rd July 2009 11th ACG...

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