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The CDP model remains popular among local retail investors because it is simple, cost-free, and gives shareholders direct ownership of their securities. This direct ownership makes corporate participation seamless—investors receive communications directly and can easily attend annual general meetings (AGMs) without intermediaries. Such ease of exercising shareholder rights is a key strength that should not be lost.
However, the broker custody model is increasingly used, especially by investors who trade overseas markets. It is also the dominant system globally. One major benefit is consolidation: investors can hold both local and foreign securities in a single account, making portfolio management more convenient. Brokers can also offer value-added services such as investment advice, fractional trading, and portfolio management. Because brokers have visibility over clients’ holdings, they can provide more tailored guidance—for example, advising on whether to participate in a REIT rights issue.
Despite these advantages, broker custody has drawbacks. Shareholders do not hold securities in their own name, which complicates participation in AGMs. Investors must arrange proxies through brokers, often with significant lead time, making the process less convenient and potentially discouraging engagement.
The article concludes that while both models have merit, the future lies in integrating their strengths. As regulators explore expanding broker custody usage, they should also incorporate the seamless shareholder experience offered by the CDP. A hybrid approach could enhance investor convenience, improve access to services, and ultimately help revitalise Singapore’s equity market.
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