You will be able to explain how CDP and custodian accounts differ in ownership, dividends, voting and fees.
When you buy a share or an ETF on the Singapore Exchange, someone has to record that you own it. There are two ways that record can be kept. Which one you use changes what you pay, how your dividends reach you, and what happens if your broker runs into trouble. It's worth deciding before you open anything.
The first way is the Central Depository (CDP), the securities depository run by SGX. When shares sit in your CDP account, they are registered in your own name. Dividends go straight to the bank account you linked to CDP. Notices about rights issues and annual general meetings come to you, and you can attend and vote. The company's records show you as the owner.
The second way is a custodian account. Here your broker holds the shares in its own name, or a nominee's name, on your behalf. You are still the owner in law, which is called the beneficial owner, but the broker is the registered holder. Dividends are paid to the broker first, which then credits you. Corporate actions go through the broker too, and you usually have to ask it if you want to vote at a meeting.
Custodian accounts are popular for a reason. They often charge lower commission, and many app-based brokers only offer this kind of account. Many bank regular savings plans also hold what you buy in custody rather than in your CDP account, so check before you sign up. The trade-off sits in the fine print. Some brokers charge a custody fee, a fee for handling each dividend, or a fee for corporate actions. Small charges like these matter on a small portfolio held for many years.
There is also the question of what happens if the broker fails. Shares in your CDP account are in your name, so they don't belong to the broker and aren't caught up in its troubles. With a custodian account, rules require the broker to keep client assets separate from its own, but getting them back after a failure can still take time and paperwork. Lesson 1.3 looks at this in more detail, including how to check that a broker is licensed by MAS.
A CDP-linked brokerage account combines the two ideas. You trade through a broker that is an SGX member, and each trade settles into your own CDP account rather than into the broker's custody. The SGX website lists the brokers that offer this. You open a CDP account once, and you can then link more than one broker to it, so changing brokers later doesn't mean moving your shares.
Neither type is right for everyone. Someone who invests a small amount every month and wants the lowest commission may accept custody fees and fewer rights. Someone who plans to hold a fund for twenty years in their own name may prefer CDP and pay a little more per trade. What matters is that you choose knowingly.
In this course you work towards a CDP-linked account, because the goal is to hold a first ETF in your own name for the long term. If you later decide a custodian account suits you better, the comparison you build in this module still applies. Check the current requirements for opening a CDP account on the SGX website before you start. You will usually need Singpass and a Singapore bank account in your name, and lesson 3.1 walks through the application step by step.
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.
Find out whether any investment you already hold sits in your CDP account or with a custodian, or write down which type you would lean towards and why.
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