CHAPTER 5

OPERATIONS & SERVICES OF

STOCK BROKING FIRM

INVESTMENT BANK (IBS) DUTIES TO CLIENTS: :.

1. OBEY INSTRUCTIONS.
2. MAKE THE BEST DEAL FOR CLIENT.
3. ISSUE CONTRACT NOTE.
4. NOT TO COMPETE WITH CLIENT.
5. INFORM THE CLIENT WHEN ACTING AS PRINCIPLE.
6. DUE CARE AND DILIGENCE.
7. MAINTAIN SEPARATE CLIENT'S ACCOUNT.
8. IBS EMPLOYEE AND DIRECTOR SHARE DEALING RESTRICTION.

TYPES OF CLIENTS
/INVESTORS:
INSTITUTIONAL
MINIMUM QUALIFYING CRITERIA UNIVERSAL BROKERS :
FOREIGN To merge/ acquired at least 3 other SBC.
CORPORATE A minimum paid up capital of RM100 million.
INDIVIDUAL Have minimum shareholder's fund unimpaired by losses of RM100 million.
Have a capital Adequency Ratio of at least 1.2 times.
Satisfy the quantitative and qualitative criteria.

THE DEPARTMENTS IN
STOCKBROKING FIRM
1. Dealing Department
2. Compliance Department
3. Settlement/ Operations Department
4. Other Related Department

1.Dealing Department
the stockbroking business revolves around the buying
and selling of shares.
client's transactions to receive, to execute and to confirm.
supported by Research Department.

2.Compliance Department
Automated Trading System (Ats) : - WinScore
to ensures compliance with all applicable
- SCORE
laws, rules & regulations.
depending on the business of the
financial institution.

1 2
3.Settlements/ Operations Department Selling clients/
Receiving section
SCANS

act as a support to process all dealing 3

4
transactions & trade setllement. 5 Allocation section
known as "backroom". Payment section

in charge to prepare contract notes,

necessary reports & contra transaction. Issuing section
(Settlement)
handle of CDS accounting
management & transfer. 6
7 SCANS,
Receipt section institution, clients

4.Research Department
research materials for clients on companies, market trends,
industry trends & general economic news
Accounts - to receive & to issue payments for transaction done.
- to monitor payment received to & from Scans.

Credit Control - to ensure all exchange policies are complied with.

- to monitor all dealing transactions.
- to monitor trading limits of clients.

Margin Trading - customers are allowed a prescribed margin on credit for their shares pledged with the company.
- credit control will oversee and control all margin trades to ensure within limits.
 CAPITAL MARKET SERVICES
REPRESENTATIVE (CMSR)
CMSA 2007 :
It requires person engaged in the securities industry to be licensed for the
purpose of protecting potential investors & maintaining appropriate standars.

Paid CMSR
- an employee of the IBs who's paid a fixed monthly income.

Remisier
- an agent of IBs and receive a commision for each transaction handled.

Commision CMSR (Remisier) Paid CMSR

An entreprenuer which own their An employee who is bound to

own asset & liabilities.
Remisier get income by received a
comission not a fixed income.
Need to bear all the operational
cost like office space, computer &
bills.
High risks as business are depends
solely on commision & ability to
track clients by themselves.
High risk, get higher return.
contract of employment.
Get fixed remuneration & all the
incentives given by the company.
Mostly all the transaction happened
at the IBs.
Mostly they will get their client after
being introduced by the firm.
Amount of commision given by the
firm are less due to fixed salary in a
monthly basis.

Risk Associated with Agency Agreement

Risk associated with Agency Agreement

Business risk :

1. Internal risk
2. External risk

REGISTERED LICENSED PERSONS OF

INVESTMENT BANKS
Eligibility requirements for Capital Market Services Reprensative
Registered Person? : Such person(s), other than PO, who are required to
be registered by the Exchange.

Executive Directors
- required to be engaged full time in the office of the PO.
- have at least 2 executive directors.
Executive Director Dealing
- responsible for the activities of the PO related to dealing in securities.
1. DIRECTORS Executive Director Operations
- responsible for the operational activities of the PO.
Executive Director Compliance
- responsible for all compliance matters of the PO (Universal Broker).
Non-Executive Director
- one/more Non-executive directors.
- shall not deal in securities on behalf of the PO.

2. COMPLIANCE OFFICER
- prohibited from performing 5. CORPORATE FINANCE
functions that may compromise EXECUTIVES
his position & function. - required to register all its
Supervisory Corporate Finance
3. SUPERVISOR/ HEAD OF Executive with the Exchane.
DEPARTMENTS
- employes of PO whose duties &
responsibilities inter-alia . 6. DEALER'S
REPRESENTATIVE

4. TRADING CLERKS Commisioned Dealer's

Representatives (Remesier).
- person who is appointed by a
Salaried Dealer's
PO/ Commissioned Dealer's
Representative (Paid-Dealer).
Representative (Remisier) in the
capacity of a clerk.

2. Contract of Agency
The Basic Legal Relationship
the agreement is formed when one person
(agent) has authority to act on behalf on another
1. Principal and Agent
(principal).
- a contractof agency is formed when a person ,
the agent has authority to act on behalf of Express instructions
another person, the principal. - given orally & keep all the records.

Implied instructions
- most terms are implied bcs principal (putting faith &
trust) relies on agent (duty to act with utmost good
faith)