In the following series of articles on HOW TO START TRADING STOCK IN BURSA MALAYSIA I will try to convey the meaning of the various terms used by the stockbroking industry in Malaysia. The articles will start from the very basic to the more complex workings of the stockbroking business. If you are a Malaysian or a resident of Malaysia you will be able to easily understand some of the terms. If you are not? I will provide legends or notes to explain the terms or maybe links for you to find out more about the terms.
If you hope to find investment advice here, you will be dissappointed. I will not be making any statement or giving any investment advice. You can try other sites. I will also not go into the very details of what is a stock or what is an exchange. You have to find out about them in Economics books available in the online or offline bookstores.
In Malaysia the man in the street often refer to stock as ‘share’ so I will use either one in all my posting….I hope you won’t get confuse. I will use the word ‘Bursa’ to mean Bursa Malaysia which again the most people in Malaysia will use.
In order for you to start buying or selling stocks that are listed in Bursa, you will first need two to open two (2) types of accounts.
Note: Bursa was previously known as Kuala Lumpur Stock Exchange or KLSE. The company that managed the exchanged is listed under the name ‘BURSA’ with the trading code ’1818′.
The two accounts required are:-
(a) CDS account.
CDS stands for Central Depository System which is an electronic account maintain by Malaysian Central Depository (“MCD”) or now known as Bursa Depository. However most stockbroking people still refer Bursa Depository to its acronym ‘MCD’ which I will use in my articles. The CDS account is just like your bank account. Whatever stocks you buy will be credited into your CDS account on due date. When you sell the stocks will be debited from your CDS account. There is no physical movement of stocks (also known as scripless trading).
(b) Trading account.
A CDS account alone will not allow you to buy and sell stocks. You will need to open a Trading Account with any of the registered stockbrokers with Bursa (also known as Participating Organisations or ‘POs’ in Bursa website). Bursa required you to reveal 4 basic information in your Trading Account application form. All POs’ Trading Account application form will have areas for you to fill these 4 informations:-
(i) Your annual income (just a gross estimate will suffice, you don’t need to give the exact figure),
(ii) Your networth. This is an estimate of all your assets such as car, house, Fixed deposits etc.,
(iii) Type of investor. Whether short term, medium term or short term investor (see note below),
(iv) The number of years trading in stock market, local or overseas.
Short term investor refer to people who buy and then sell their shares in short period of time such on the same day or within a few days or within a few weeks. Medium term investors are those who will hold for a few months before selling their shares and Long Term refer to investor who normally buy shares in expectation to hold them for few years in hope of receiving dividends payout and share price appreciations.
Who can open a CDS or Trading Account?
Basically anyone above 18 years old, Malaysians or non-Malaysians or a private limited company or a limited company again local or foreign.
As the MCD rules are more restrictive, all POs will follow the MCD rules when it comes to approving any application.
According to the MCD a non-bankrupt individual above 18 years old, private limited or limited company can open a CDS account. Sole proprietorial companies and partnership companies are not allowed to open a CDS account. For example; if you own a shop under ABC Enterprise, you are only allowed to open a CDS account under your personal name and not under the company’s name.
Since MCD has such restriction, you will also not be able to open a trading account under the same conditions because the Trading Account name must be the same as the CDS Account name opened with MCD. Otherwise it will be a breach of the MCD Act which has been enacted by the Parliment of Malaysia.
When you go to any PO to apply for a Trading and CDS account, you better bring the following supporting documents otherwise you will have to make a second trip.
Steps to open an Individual Account
Step 1. You can request for a CDS Opening Account Form (form FMN01) from one of the listed stockbrokers. Remember that you must be at least 18 years old to open an account.
Step 2. Complete the Opening of CDS Account form and sign on TWO (2) Specimen Signature Cards. Some brokers require you to sign 3 cards but the minimum is 2.
Step 3a. For Malaysians you have to submit the form and specimen cars together with two (2) certified true copies of your Malaysian National Registration Identity Card (“NRIC”). If you know of any licensed Dealer’s Representative (“DR”), you can ask for these documents and have the DR to certify the copy of NRIC. If you don’t know any DR and you can also walk in to the PO’s customer service counters and the PO’s staff will normally ask one of their company’s DR to witness the documents.
Step 3b. If you are a foreigner, you will have to submit two (2) certified true copies of your passport instead of the Malaysian NRIC.
Step 4. Pay RM10.00 to open the CDS account. This is charged by MCD.
Malaysian or non-Malaysian that are not in Malaysia can still apply for the accounts. You can request via phone or online for the forms but the forms and the supporting documents must be certified by a Notary Public.
Example of a Notary Public are the Ambassadors of Malaysia in the respective foreign countries.
Steps to open a Company Account
Step1. Complete the CDS Opening of Account Form (form FMN01) and two (2) Specimen Signature Cards.
Step 2. Submit the above documents with two (2) copies of all the necessary supporting documents (e.g. Certificate of Incorporation, Board Resolution, etc) together with the Account Opening fee (RM10.00). The POs’ will provide a list of required documents.
Step 3. Please ensure all the supporting documents (except the specimen signature cards) are certified true copies by the company secretary or by one of the director of the company. Each director must sign on 2 copies (or 3 copies as required by the POs) of the specimen signature cards. You will also need to place the company rubber stamp on the card (just like the bank).
Note: Only company with the specific clause(s) in their Memorandum of Articles and Associations (M&A) that state to the effect that the company is allowed to buy and sell stocks are allowed to open a Trading Account. Please check for the clause(s) in the M&A. All POs will provide sample of the Board Resolutions for you to type under your company letter head.
Note: In Malaysia there two types of licensed DR; a paid or salaried DR is known a company Dealer while a commission based DR is known as a Remisier.
In my next posting I will explain the process of trading. Don’t missed out on my next posting by subscribing to my Feed.