Standard Chartered have been late to the Singapore brokerage scene but attracted a lot of retail investors with
- No minimum commission
- Zero custody fees
- Low fees
But how well does SCB handled cash calls/rights issues? Turns out if you intend to hold stocks with SCB long term it actually handles rights issues quite well.
Why does this matter
From time to time, the stocks that you are holding in your SCB account need additional funding other than capital garnered during IPO. The stock can either raised debts or raise more equity, the latter being rights issues.
Rights issues gives the existing shareholder the right to increase his number of shares by investing more capital in addition to his original share purchase. If the investor do not wish to, he can sell off the rights so that he will not be diluted after the rights issues.
Rights issues are very common among capital intensive or high dividend payout companies such as REITs and utilities. If you are a dividend investor with income producing stocks like REITs and utilities, you would want to know whether SCB handles this well.
I recently went through a rights issue with LMIR and would like to share with readers my experience.
How SCB is different from CDP held shares
The difference here is that SCB is a sort of nominee account which means that you will not get letters of corporate action like you would if its shares held under CDP account normally.
As such, you will not received a letter telling you why LMIR wants more of your money, what is in it for existing share holders and all the important dates.
Upon closing of trading of rights entitlements, you will get a call from SCB asking whether you would like to take up the rights.
Know the important dates well
As you are unaware of important dates, it becomes important for you to keep track of important dates. It is important that you do that because
- You want to know when LMIR go ex rights and price drops off to TERP price
- You want to know when the rights start trading if you want to sell the rights if you do not wish to participate in the rights issue or if you feel the rights are cheap you can buy the rights
- When is close of rights entitlements and the last date and time you can accept the rights. If you missed this date you would not be able to participate.
I did not own any LMIR shares previously, so I had to purchase the rights between the 10th to 18th of November and I got them at an average price of $0.04 which make my average price at $0.35.
Whether you purchase the rights or you own the shares before 10th of November, SCB customer service will call you to ask you
- Whether you would like to take up the rights
- Whether you would like to subscribe to excess rights
Now here is the things to note:
- After the close of the entitlement, make sure you monitor your mobile phone because SCB will only have a small window to call you. I received a call on the 19th at 10 am telling me that I need to respond by 12 pm that day and I was in a meeting without my phone!
- Make sure that you know whether you are entitled to excess rights. The customer service person may be inexperience to know that but if you know you are entitled you need to check with them. By default the customer service person will raised it to you if you are entitled to it. It should be noted that because I do not own the shares originally I cannot subscribe to excess rights. It took my relation manager to explain this to me.
- Once you make your decision you need to ensure that you have enough funding in your SCB Settlement Account to buy the rights and excess rights. This goes the same as all your normal share purchase under SCB.
- The shares may be late in showing up on your SCB trading account. Mine only showed up on 6th Dec, 1 day after it started trading on the 5th.
I hope I provided you with enough info on how this unique brokerage handles rights issues. It is not really too much hassle I feel but its just frustrating that they only had a small window to get your request.
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