Electronic Safe Custody
Some years ago the Stock Exchange introduced an electronic
settlement system - CREST. While this did not result in the
elimination of share certificates for the vast majority of
private individuals, it has greatly simplified and streamlined
the transfer of shares between parties undertaking transactions.
This has meant that the London Stock Exchange standard settlement
time for transactions is now 3 days (and is intended to be
reduced to 1 day in the foreseeable future). Clearly it is
impossible to administer transactions for individuals with
holdings in certificate form within such a time scale, and
at present we execute transactions for such holdings on a
delayed 10-day settlement system, which will soon cease to
be commercially viable.
In order to facilitate dealing within the faster settlement
period Cunningham Coates Stockbrokers is now in a position
to offer an electronic safe custody system for clients.
In essence investments compatible with the system (i.e. Government
Stocks and nearly all shares quoted through the London Stock
Exchange as well as some European shares) will be held by
ourselves in a dedicated electronic account for the individual
shareholder. The holding remains in the shareholder’s
name and all correspondence from the company goes to them
in the normal way. As well as facilitating speedier settlement
we believe this will have a number of other benefits for
clients as outlined below:
When selling shares no transfer is required (allowing 3-day
and in the future potentially 1-day settlement) which means
that individuals can undertake transactions when not in a
position to deliver paperwork (for example, when on holiday).
There is no restriction on selling a recent purchase - previous
difficulties where a sale cannot be delivered due to non-receipt
of the share certificate arising from a recent purchase will
no longer arise.
In the majority of cases where companies undergo Schemes
of Arrangement and new shares are issued these are credited
automatically to the electronic safe custody account. This
usually occurs significantly before the paper certificates
are released by the Registrar thereby resulting in an earlier
opportunity to sell the new shares. It also removes the need
for the new certificates to be forwarded to ourselves as
safe custodian if using the conventional safe custody service.
The electronic safe custody system means no lost certificates
and so eliminates the punitive cost of obtaining indemnities.
Due to the reduced likelihood of difficulty in delivering
sales we are able to offer a reduction in our headline commission
rate for clients utilising this service.
A modest six-monthly fee will be charged for the electronic
safe custody service but this will be offset against commission
generated in the period and we estimate for the majority
of clients it will not, therefore, be applicable.
If you wish to receive further information on this service
or to utilise same, please contact your Account Executive.
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