Sat | Apr 4, 2020

Oran Hall | Transferring securities between JCSD accounts

Published:Sunday | February 2, 2020 | 12:28 AM

ADVISORY COLUMN: PERSONAL FINANCIAL ADVISER

QUESTION: I have equity accounts with two stockbrokers. Over time, I have been purchasing stocks using just one of them. I would like to transfer stocks brought through them to the other stockbroker. Would JCSD facilitate that?

– Craig

FINANCIAL ADVISER: The Jamaica Central Securities Depository, JCSD, is a wholly-owned subsidiary of the Jamaica Stock Exchange, JSE. It facilitates the speedy registration of and changes in the ownership of securities traded on the JSE, electronically, in a process that includes investors, stockbrokers and the JSE.

An individual desiring to buy securities on the Jamaica Stock Exchange must first establish a relationship with a stockbroking company by opening an account with it. The broker then creates a JCSD account for the prospective investor. The following are required for the account-opening process: a government-issued identification card; TRN card or certified copy of it; proof of source of income (the last two payslips, or, in the case of the self-employed, the most current bank statement, which should not be more than three months old); proof of address in the form of a utility bill; two references (full name of reference, contact number, address or place business).

Upon opening the account, the client is issued a number for the broker account and one for the JCSD account. The broker then submits the JCSD application to the depository for its approval and it opens an account for the client using the number generated by the stockbroker. This process usually takes one business day.

The new account holder is required to either place $25,000 on the account or place an order for at least 100 shares. The JCSD credits the account of the investor who purchases securities and debits the account if the investor sells. It also generates statements on the accounts of investors and dispatches them to them, thereby enabling investors to keep track of their portfolio.

Investors may have accounts with several brokers and, therefore, several JCSD accounts, and it is not hard to see that it would be easier to sell securities through the broker that purchased them for the investor.

Inter-member movement

It is possible, though, to do what you enquired about, that is, to move securities registered in one JCSD account to another JCSD account. To do so, you would need to complete the Inter Member Movement Form. The process has to be initiated by the stock brokerage company which set up the JCSD account in which the securities reside. The document is then sent to the other stock brokerage company which then sends it to the JCSD to effect the change.

The JCSD has made a very significant difference to the trading of securities on the Jamaica Stock Exchange and the accompanying settlement process. It is primarily responsible for the speed at which settlement takes place, two business days after the date of the transaction, referred to as T+2. Sellers are able to receive payment for the securities they sell two business days after doing so, and buyers are able to establish their ownership of the securities in the same time frame. They may, for example, use their securities to secure loans if the lending institution is willing to facilitate it.

Because the JCSD has made it unnecessary for investors to hold physical securities, their owners need not worry about certificates being lost, damaged by fire or water, mislaid or stolen. It has also eliminated the long and tedious process of transferring the ownership of the securities which the previous system caused due to the paper work required. Don’t even mention the significant reduction of the risk of human error.

The JCSD has made it possible to settle many transactions, some quite large, in the twinkling of an eye. Imagine the nightmare that today’s volumes and intense activity on the stock market would cause using the old paper-based system.

Before the advent of the JCSD’s electronic system, the owners of listed securities could sell them through any broker using physical certificates to facilitate settlement. The current system restricts the ability of the investor to do that. The investor either sells from the JCSD account through which the securities were purchased or transfers the securities to another JCSD account through they are to be sold, or the investor may just choose to keep them in the new account without selling them.

Oran A. Hall, principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.

finviser.jm@gmail.com