SC approves introduction of new standard remisiers' agreement

Kuala Lumpur, 26 January 1999

The Securities Commission (SC) has approved the introduction of a standard remisiers' agreement that will govern the relationship between all remisiers and member companies in the stockbroking industry.

The SC approved the introduction of the new standard agreement after facilitating extensive consultation between the stockbroking industry and remisiers which was aimed at responding to remisiers' comments on the previous arrangement and addressing systemic concerns arising from the relationship between the remisier and the stockbroking company. The new agreement ultimately enhances the legal certainty in the relationship between the stockbroking company and remisiers.

The SC Chairman Dato' Dr. Mohd. Munir Majid, in hailing the introduction of the standard agreement, said, "While it has taken a long time in coming, this is a significant milestone for the industry. The SC stepped in to force the pace, but the final outcome is the result of a consensus".

He added, "The negotiations for this new standard agreement which started in 1996 were long and arduous but with effort put in by all parties, the SC is confident that the resultant agreement reflects a marked improvement from the previous situation".

In the approval to the introduction of this agreement, the SC has directed the Kuala Lumpur Stock Exchange (KLSE) to supervise and ensure the smooth implementation of the new standard agreement.

Under the new standard agreement the remisier shall be regarded as an agent of the stockbroking company to trade in securities in the name of the company. This relationship was not made explicit in the previous arrangements between remisiers and stockbrokers.

With the new agreement, the rate of commission for remisiers will be fixed and standardised as stipulated in the Rules of the KLSE. Moreover, where the total commission earned by a remisier in a particular month is less than RM1,000, no retention of the commission by the stockbroking company for indebtedness of a client of the remisier can be effected. This is to ensure that the remisier is not faced with undue hardship when trading volumes are low.

Remisiers can post security deposits in the form of cash, bank guarantee, securities or other assets, which are acceptable to the stockbroking company. In order to protect the remisiers, the agreement clearly requires that the security deposit be segregated from other assets that are kept by the company on behalf of the clients.

There are explicit clauses in the contract that ensure the rights of both remisiers and the stockbroking company.

The remisier is responsible for any losses, which may be incurred by the stockbroking company arising from any transaction in securities dealt by or through him. For this reason, the agreement requires the remisier to take into account the client's investment objectives, knowledge and experience in dealing in securities as well as the particular needs of the client.

The stockbroking company is required to take all relevant and reasonable action against clients for the recovery of indebtedness which should be reimbursed to the remisier in the event that the remisier's security deposit has been utilised towards the satisfaction of indebtedness.

While remisiers are responsible for the indebtedness of their clients, they are exonerated from liability in respect of losses through the willful default, negligence, instruction or incorrect administrative procedures and accounting statements issued by the directors, officers and employees of the stockbroking company.

Apart from the responsibilities and obligations to clients, the new agreement stipulates the required administrative arrangements between the remisier and stockbroking company. The facilities accorded to remisiers in order for them to conduct their trading activities include reasonable seating accommodation, telephone installation (for the first three lines), the Broker Front End System including network infrastructure set up and such other facilities as may be necessary for the remisier to conduct trading in securities.

The stockbroking company is required to disseminate copies of all directives, circulars and information relevant to the remisier in respect of the conduct of the remisier's trading transactions.

The SC will direct the KLSE to make the necessary changes to its Rules to bring into force the operation of the standard agreement. Once the changes to the Rules are effected, all new remisier-stockbroker arrangements will have to be based upon the standard agreement. Stockbrokers and remisiers with on-going arrangements are given six months from the date the changes come into effect to adopt the new standard agreement.


Issued on behalf of the Securities Commission. For assistance, please contact the Corporate Affairs Department at tel. no. 03-2536184 (Karen De Cruz)/ 03-2507695 (Sarina Ariffin) or fax no. 03-2536184.
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