Your overseas shares sit in someone else's name

You will be able to explain custody and nominee accounts and say who holds each of your overseas investments on your behalf.

Buy a share of a Singapore bank through a broker linked to your CDP account and something simple happens. The share is recorded at The Central Depository in your own name. If the broker shuts down tomorrow, the share is still yours, sitting in a register kept apart from the broker's own books.

Buy a share of a US company and the chain gets longer. Your broker usually does not hold it directly. It holds the share through a custodian, often a large bank or a US broker, and that custodian holds it through the US central depository, the Depository Trust Company. At no point in that chain does your name appear on the company's register. What you have is a record in your broker's books saying that some of the shares held in a pooled account belong to you.

This is the first idea of the course: custody is the question of who holds an asset on your behalf, in whose name, and on what legal terms. A custodian is the firm that actually holds the securities. A nominee account is an account held in the custodian's or broker's name for the benefit of many clients, and it is how most retail investors in Singapore own overseas shares.

Nominee accounts are normal and not a scam. They make cross-border trading cheap, because one broker can settle thousands of client trades through a single pooled account. But they change the questions you should ask. With a CDP account, the main question is whether the company is sound. With a nominee account, there is a second question: if the firm holding my shares fails, how do I prove which shares are mine and get them back?

The answer depends on rules, and the rules depend on where the firm is licensed. In Singapore, a broker holding a capital markets services licence from MAS must keep customer money and assets separate from its own, in trust or custody accounts set up for clients. A US broker-dealer must follow US customer protection rules and is usually a member of SIPC, a body that steps in when a member firm fails and client assets are missing. Other countries have their own schemes. You will look at each in lesson 1.3. For now, notice that the answer is not about the app on your phone. It is about the legal entity your account is opened with, which is often not the one whose logo you see.

Here is a common surprise. Many international brokers book Singapore customers with a Singapore subsidiary or with an entity in a third country. Two people using the same app can have accounts with different legal entities, covered by different rules. The account agreement and the account statement name the entity. Most investors never read either.

There is also a practical side to custody that matters long before anything fails. Dividends from a nominee account pass through the custodian before they reach you, which is where withholding tax is taken, the subject of module 3. Corporate actions such as rights issues and share splits are processed by the broker, sometimes with a fee and sometimes with less choice than a registered holder gets. And if you die, your family has to deal with the broker and its custodian to get the shares out, which is far easier if they know the account exists.

None of this means overseas investing is too risky to attempt. It means you should know three things about every account you hold: the legal entity your account is with, the regulator that licenses it, and how client assets are held. Those three facts take ten minutes to find and tell you more about your safety than any review or ranking.

Your task for this lesson: open the account agreement or the latest statement for each brokerage account you have. For each one, write down the exact name of the legal entity, the country it is licensed in, and whether your shares are held in your own name or in a nominee or custodian account. If you cannot find an answer, write the question you would send to the broker's support team. You will use this list in lesson 1.4.

For each brokerage account you hold, write the legal entity name, its country of licence, and whether your shares are in your name or a nominee account.

Course

• Investing in US and global markets from Singapore