You'll be able to explain how CDP and custodian accounts differ on ownership, dividends, voting and fees.
Before you open any investment account, find out where the shares you buy through it will be recorded. Every share or ETF bought on the Singapore Exchange (SGX) must have its ownership recorded by someone, and that record can be kept in one of two ways: in a CDP account or by a custodian. The choice affects what you pay, how dividends reach you, and what happens if your broker runs into trouble, so it is worth deciding before you sign up anywhere.
The Central Depository (CDP) is the securities depository run by SGX. Shares in a CDP account are registered in your own name, and the company's records show you as the owner. Dividends are paid directly to the bank account you linked to CDP. Notices of rights issues and annual general meetings (AGMs) come to you directly, and you can attend and vote at those meetings yourself.
In a custodian account, the broker holds the shares in its own name or a nominee's name on your behalf. You remain the legal owner, called the beneficial owner, but the broker is the registered holder, which means the broker is the party named in the company's records. Dividends are paid to the broker first and then credited to you. Corporate actions such as rights issues go through the broker, and if you want to vote at a meeting you usually have to ask the broker to arrange it.
Custodian accounts often charge lower commission, and many app-based brokers offer only custodian accounts. Read the fine print for other charges: a custody fee, a handling fee on each dividend, or a fee for corporate actions. On a small portfolio held for many years, small charges like these matter. Bank regular savings plans need the same check, because many of them hold your purchases in custody rather than in your CDP account. Find out which applies before you sign up.
The difference also shows up if a broker fails. Shares in your CDP account are in your name, do not belong to the broker, and are not caught up in its troubles. With a custodian account, rules require the broker to keep client assets separate from its own, but recovering them can still take time and paperwork. Brokers in Singapore should be licensed by MAS. Lesson 1.3 covers what happens when a broker fails in more detail, including how to check that a broker is licensed.
There is a third arrangement that combines the two. With a CDP-linked brokerage account, you trade through a broker that is an SGX member, and each trade settles into your own CDP account instead of into the broker's custody. The SGX website lists the brokers that offer these accounts. You open a CDP account once and can link more than one broker to it, so if you change brokers later, you do not need to move your shares.
Neither account type is right for everyone. Someone investing a small amount each month who wants the lowest commission may accept custody fees and fewer rights in return for a custodian account. Someone planning to hold a fund for twenty years in their own name (another hypothetical profile) may prefer CDP and pay a little more per trade. Both can be reasonable choices, provided you make the choice knowingly.
This course works towards a CDP-linked account, because the goal is for you to hold a first ETF in your own name for the long term. If you later prefer a custodian account, the comparison you build in this module still applies. The path runs in this order: check the current CDP account-opening requirements on the SGX website before you start; make sure you have Singpass and a Singapore bank account in your own name, which are the typical requirements; apply for your CDP account, which lesson 3.1 walks through step by step; then link one or more SGX-member brokers to it.
To finish, look at any investment account or savings plan you already hold. Find out whether what you own sits in your CDP account or with a custodian, and write down the answer. If you don't hold anything yet, write down which type of account you'd lean towards and why.
Check whether any investment you already hold is in your CDP account or with a custodian. If you don't hold any, write down which type you would choose and why.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).