Operations and Services of Stock Broking Firm - PDF

CHAPTER 5 OPERATIONS AND SERVICES OF STOCK BROKING FIRM Prepared by Suhaily Maizan Abdul Manaf What We'll Discuss TOPIC OUTLINE Stock broking firm duties to the client. Departments in stock broking firm. Capital Market Services Representative....

CHAPTER 5 OPERATIONS AND SERVICES OF STOCK BROKING FIRM Prepared by Suhaily Maizan Abdul Manaf What We'll Discuss TOPIC OUTLINE Stock broking firm duties to the client. Departments in stock broking firm. Capital Market Services Representative. Principal and Agent: Contract of Agency. ELLY MAIZAN LEARNING OUTCOMES 1. To discuss the stock broking firm duties to its client. 2. To differentiate various departments in a stock broking firm. 3. To learn the duties of the Capital Market Services Representative. ELLY MAIZAN  PONDER ON THIS WE CAN' T SOLVE PROBLEMS BY USING THE SAME KIND OF THINKING WE USED WHEN WE CREATED THEM. - ALBERT EINSTEIN STOCK Obey instruction Make the best deal for client BROKING Issue contract note FIRM Not to compete with client DUTIES TO Inform the client when acting as principal CLIENTS Due care and diligence Maintain separate clients’ accounts  Types of clients handled by Stock Broking Firms INSTITUTIONAL FOREIGN CORPORATE COOPERATIVE DIRECT OR CLIENTS CLIENTS CLIENTS INSTITUTION MARGIN e.g. Permodalan Nasional e.g. Brokers/SBC/PO e.g. Felda, Koperasi Polis INDIVIDUAL Berhad, Employee Provident Fund, and CLIENTS Insurance Companies ELLY MAIZAN DEPARTMENTS IN STOCK BROKING FIRM  MAIN DEPARTMENT DEALING OPERATIONS TREASURY CREDIT DEPARTMENT DEPARTMENT DEPARTMENT CONTROL Executes client’s Process all dealing Comprises Islamic and DEPARTMENT transactions such as transactions and trade Conventional Sections Ensure all Exchange receive, execute, and settlements (prepare that manage the balance policies are complied confirm, and it is normally contract notes, sheet, capital with, monitor all dealing supported by the necessary reports, and management, interest or transactions, and research department for contra transactions profit rate management, managing trading limits of and funding and liquidity clients management ELLY MAIZAN OTHER DEPARTMENTS RESEARCH DEPT DERIVATIVES DEPT BACK OFFICE (OPERATIONS & TECHNOLOGY) CAPITAL MARKET SERVICES REPRESENTATIVE (CMSR) A PERSON ENGAGED IN THE SECURITIES INDUSTRY TO BE LICENSED FOR THE PURPOSE OF PROTECTING POTENTIAL INVESTORS AND MAINTAINING APPROPRIATE STANDARDS. ELLY MAIZAN  COMMISSIONED CMSR Like an entrepreneur (not act as an employee to any SBC). PAID CMSR Person as an employee that bound to contract Receive commission but not fixed income. of employment. Bear all the operational costs such as office They have fixed monthly income. space, telephone, computer, and other Stationed at investment banks. amenities. High risk as businesses are depending solely on Get client after introduced by the firm. commission and ability to track client. Low risk low return. Higher risk and higher return. ELLY MAIZAN Restrictions Not engaged in any other business activities. of CMSR Be a director/shareholders/debenture holder in any company deals in the security business. Have any interest in any company which is formed for purpose of transacting shares / securities. Transact any business / deal with any person / company formed for purpose of dealing in securities / or other shares. Opening of client’s account (except for reputable institution / corporation, and client residing outside Malaysia. ELLY MAIZAN PRINCIPAL AND AGENT CONTRACT OF AGENCY The Law of Agency is governed by Part 10 of the Contracts Act 1950. Section 135 of the Contracts Act 1950 defines an Agent Principal is defined as “The person for whom such act is as “A person employed to do any act for another or to done, or who is represented”. represent another in dealings with third persons”. ELLY MAIZAN  DUTIES OF AGENT To act on behalf of To act within the Discharge his or Avoid conflict and be subject to scope of authority her duties with between his or her the control of the power delegated appropriate care personal interests principal by the Principal and diligence and those of the Principal ELLY MAIZAN END OF CHAPTER 5