Cdc final

Arshiyan siddiqiRaheel iqbalTaha hassan

Wahaj hussainZunairah feroz

Prepared by:Presented to:Sir Ghulam Murtaza

• Incorporated as a public limited (Unlisted) company in 1993, Central Depository Company of Pakistan Limited (CDC) is the only depository in Pakistan.

• The Company started operations in September 1997.

• CDC is the sole entity handling the electronic (paperless) settlement of transactions carried out at all three stock exchanges of the country.

Introduction .

• The main function of CDC is to operate and maintain the Central Depository System (CDS), drawing guidance from a well-defined legal framework laid down by Securities and Exchange Commission of Pakistan (SECP).

• CDS is an electronic book-entry system used to record and maintain securities and to register the transfer of securities.

• The system changes the ownership of securities without any physical movement or endorsement of certificates and execution of transfer instruments.

• CDS facilitates equity, debt and other financial instruments in the Pakistani Capital Market.

• It manages Ordinary & Preference shares, TFCs, WAPDA Bonds, Sukuk, Open-End & Closed-End funds and Modaraba Certificates.

WHAT IS CDC? .

Following are some of the benefits of electronic settlement of securities through CDS:• Reduced workload and manpower requirements due to

paperless settlement. • Instantaneous transfer of ownership.  • No stamp duty on transfers in CDS. • No risk of damaged, lost, forged or duplicate certificates.  • No impact in case of sudden increase of settlement

volumes.  • Instant credit of corporate entitlements (bonus, rights and

new issues).   • Paperless environment (no traditional vaults). • Secure custody of securities. • Substantial reduction of paperwork during book closure. • Convenient pledging of securities. • Substantial reduction in time & capital investments.

BENEFITS OF ELECTRONIC SETTLEMENT .

CDC ELEMENT• Participants/Account Holders: Account Holders in CDS are

divided in two categories: – Participants: are allowed to keep their beneficially owned securities in

CDS and provide custody services to their clients as well.– Account Holders: are only allowed to keep their beneficially owned

securities in CDS.

• Issuers: The companies or Issuers of capital whose securities (both equity & debt) are converted from physical to electronic securities play a significant role in CDS.

• Eligible Pledgees: Financial institutions that lend against securities can join CDC in the capacity of Eligible Pledgees.

TRANSACTIONS HANDLED BY CDC

• Deposit of Securities • Transfer of Securities • Pledging of Securities • Pledge Release • Pledge Call • Withdrawal of Securities • Corporate Action

ELECTRONIC SETTLEMENT• CDC Network: CDC's network is spread across

Karachi, Lahore and Islamabad. The sites are interconnected through highly reliable WAN links.

• Business Continuity Program: CDC is one of the first few Pakistani institutions to establish a comprehensive Business Continuity Program (BCP); hence Business Continuity remains one of CDC’s primary focuses.

SECURITY MEASURESTo ensure utmost security of information, multiple levels of protection have been deployed to create an impregnable system for hackers and unauthorized users. Some of the major security measures include: • Unique CDS Terminal information binding on backend server • Terminal Authentication – A dual factor authentication protocol comprising

of a 4 digit pin number and a 6 digit automatically generated passcode • Virtual Private Network (VPN) • Various Firewalls • Complex password authentication into CDS Application as per best practices • Segregated User Level Authorities • CLI binding • Servers - The central servers comprise of powerful, fault tolerant and

redundant servers with large storage devices and fast archival systems at the primary site

ORGANIZATION STRUCTURE

ORGANIZATION MANAGEMENT• The operations of the company are carried out by a team of

highly talented and experienced professionals belonging to a wide spectrum of relevant disciplines with graduate and postgraduate qualifications from distinguished local and foreign institutions.

• The Chief Internal Auditor functionally reports to the Board and administratively reports to the Chief Executive Officer.

• The CEO of CDC is Muhammad Hanif Jakhura• Fazal Ghafoor is CFO and Company Secretary• Muhammed Junaid Sheka is Chief Internal Auditor

SHAREHOLDERS OF CDCSince its public limited company its shareholding is classified as under:

Shareholders Total No. of Shares Held % of Shareholding

The Karachi Stock Exchange (Guarantee) Limited 25,875,200 39.8Lahore Stock Exchange (Guarantee) Limited 6,500,000 10.0Citibank Overseas Investment Corporation 6,500,000 10.0MCB Bank Limited 6,500,000 10.0Habib Bank Limited 4,124,901 6.35National Investment Trust Limited 4,124,900 6.35Industrial Development Bank of Pakistan 3,250,000 5.0NIB Bank Limited 3,250,000 5.0Islamabad Stock Exchange (Guarantee) Limited 1,625,000 2.5Crescent Steel and Allied Product Limited 1,787,500 2.75Allied Bank Limited 650,000 1.0IGI Insurance Limited 422,499 0.65Innovative Investment Bank Limited 325,000 0.5Crescent Standard Business Management (Private) Limited 65,000 0.1TOTAL 65,000,000 100.00

LEGAL FRAMEWORK• Central Depository Company of Pakistan Limited was formed under Central

Depositories Act 1997 which was passed on June 10, 1997. Subsequently, Central Depository Company of Pakistan Limited Regulations were developed and approved by the Securities and Exchange Commission of Pakistan.

Relevant Legislation:• Central Depositary Act, 1997• Central Depositary Company of Pakistan Limited Regulations (May 2012)Related Legal Framework:• Companies Ordinance, 1984• Zakat & Ushr Ordinance, 1980• Securities and Exchange Ordinance, 1969• Non-Banking Finance Companies and Notified Entities Regulations, 2008• Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003Other Regulations:• The Anti-Money Laundering Act, 2010• The Anti-Money Laundering Rules, 2008• The Anti-Money Laundering Regulations, 2008

INTERNATIONAL LINKAGES AND AFFILIATIONSCDC is an active member of the following regional and international bodies / entities:• Asia-Pacific Central Securities Depository Group (ACG)• Association of National Numbering Agencies (ANNA)• South Asian Federation of Exchanges (SAFE)• International Securities Services Association (ISSA)• Memorandums of Understanding (MoUs)

– Korean Securities Depository (KSD) – Japan Security Depository Centre (JASDEC) – Depository Trust & Clearing Corporation (DTCC), U.S.A. – Thailand Securities Depository (TSD) – Abu Dhabi Securities Market (ADSM) – Dubai Financial Market (DFM)

INDUCTION OF SECURITIES IN CDC

The Companies or Issuers of capital who’s Securities are converted from physical to electronic book entry Securities play a significant role in the Central Depository System (CDS).

Security Induction process in CDS is divided into three major parts:• 1. Declaration of Securities as CDS Eligible Securities • 2. Set up of Securities in CDS • 3. Deposit or Credit of Securities into CDS

INDUCTION OF SECURITIES IN CDCDeclaration of Securities as CDS Eligible Securities As per Central Depository Company of Pakistan Limited Regulations (CDCPL Regulations), the Central Depository Company of Pakistan Limited (CDC) can declare any Security (listed or unlisted) as an eligible Security if it is satisfied that:• The Issuer has the data processing capacity and operational capability.• The Securities are valid, legal and transferable by book entry or otherwise. • The Issuer has acquired or has the capability to acquire the capacity to communicate reliably

with CDC in accordance with the procedures. • The Issuer employs or has the capability to employ personnel familiar with the regulations

and procedures to carry out its obligations. • The Issuer is not in receivership, court-appointed manager-ship or winding up or under any

equivalent form of administration. • The declaration of the Securities as Eligible Securities would be in the public interest. Upon receiving the request from client, CDC provides the Eligibility requirements to the client.Once the complete Eligibility documents are received, Notice of Declaration of CDS Eligible Security is issued.

INDUCTION OF SECURITIES IN CDCSet up of Securities in CDS• Once the Notice of declaration of CDS eligibility is issued, a

Security Induction Package (SIP) is sent to the Issuer.• Upon receipt of SIP documents from the issuer, CDC performs

the following:– On confirmation from the Issuer regarding availability of

hardware, CDS software is installed at Issuer's / Registrar's premises. – A comprehensive training session is conducted to train the users of

the CDS to their satisfaction. The session explains in detail the concept & workings of the CDS.

– Once the setup of the Security is done in CDS; CDS User IDs & Passwords are sent to the Issuers.

INDUCTION OF SECURITIES IN CDC

Deposit or Credit of Securities into CDS• After setting up the security in CDS, in case of New

Issue, R/TA uploads the data in CDS following the procedures for new issue.

• Issuer is also requires to provide the relevant documents as per the Procedures for input of paid-up Capital/total issue in CDS.

• In case of Physical Certificates, deposit transaction will have to be initiated in CDS through CDS Participants.

INVESTOR ACCOUNT SERVICES (IAS)• Investor Account Services (IAS) offered by Central Depository

Company (CDC) allows retail investors to directly open and maintain accounts with CDC in Central Depository System for electronic settlement of securities.

• Earlier, to settle the securities through Central Depository System, investors had to open client accounts (sub accounts) with the CDS Participants (brokers & financial institutions).

• With Investor Account Services, investors can now have direct access to their account.– Investors now have direct access to their securities, which are maintained

by CDC and accounts operated on the instructions of investors. – CDC is regulated by the Securities & Exchange Commission of Pakistan. The

relevant legislations are Companies Ordinance 1984, Central Depositories Act 1997 and Central Depository Company of Pakistan Limited Regulations.

PROCESSES IN IASEligibility Criteria• The following are eligible to open Investor Accounts with

CDC:– Individuals who are Pakistani nationals (Residents/ Non

Residents), Foreigners and;• Are not minor • Are of sound mind • Have not applied to be adjudicated as an insolvent, have not

suspended payments and have not compounded with their creditors. • Are not un-discharged insolvent.

– Other than Individuals such as corporate entities, societies etc.

PROCESSES IN IAS• Delivery Out: At the time of opening of Investor Account,

an investor is given a transaction order (T.O.) book (similar to a bank Cheque book) for delivery out transactions. The investor fills out details in the transaction order leaf and submits the same at the front desk of IAS department along with the payment. Before making the payment, the investor makes sure that his/her account has sufficient available balance of the security to be transacted.

• Delivery In: An investor needs to provide his/her investor account number to the Participant in order to transfer securities in his/her Investor Account.

PROCESSES IN IAS• Deposit: In order to deposit securities into Central Depository

System, an investor needs to fill out the Securities Deposit Form; affix transfer stamps as per the prevailing rate on the R/TA copy of the form and submit it at the front desk of IAS department.

• Pledge: In order to pledge his/her securities, an investor needs to fill out the securities pledge form and submit it at the front desk of IAS department.

• Withdrawal: In order to withdraw securities from Central Depository System, an investor needs to fill out the Securities Withdrawal Form; affix transfer stamps as per the prevailing rate on the second or third copy of the form and submit it at the front desk of IAS department.

PROCESSES IN IAS• Subscription: To subscribe unpaid rights investor needs to submit

request for subscription at the front desk of IAS department. Further subscription can also be made through IVR, fax, email.

• Closing of Investor Account: To close an Investor Account, an investor has to intimate CDC through Account Closing Request Form. The account will not be closed in the following circumstances:

• If the cash or security balance of Investor Account is not zero• If there is any pending corporate action awaiting credit in Investor Account• If there is a pending withdrawal request

– Therefore, if the security balance is not zero, investors can either move the securities out of the account through delivery out transaction or withdraw the balance. In case of cash balance, investors can deposit/claim the balance, as the case may be.

ACCOUNT OPENING PROCESS• To open an Investor account, investors need to fill out the Investor

Account Opening Form available at the M&CSS counters at CDC offices or download from CDC website. Investors can also get the form by mail through a written or telephonic request. For a telephonic request, call our Customer Services at the toll free number: 0800-CDCPL (23275).

• The applicant’s physical presence along with original valid CNIC is mandatory at the time of submitting application for opening of Investor Account in the category of resident Pakistani. In case of joint account physical presence along with valid CNIC of all applicants will be required.

• Investors are required to submit the following with the application form:

ACCOUNT OPENING PROCESSIn case of an Individual Investor:• Copy of CNIC [Applicant (Title Holder) & all Joint applicants, if applicable]• Copy of Passport for foreigner duly attested by Consulate Office of Pakistan• Copy of NICOP for Non-Resident Pakistani duly attested by Consulate Office of

Pakistan • Bank Verification is required on the Account Opening form by the bank manager

only where the applicant (Title holder) of the prospective IAS Account is maintaining a bank account.

• Documentation of Zakat Status [Notarized copy of declaration on prescribed format for applicant (Title Holder) & all Joint Account Holders, if applicable]

• Affidavit for Nomination(s) (As per prescribed format on Rs.20 non-judicial stamp paper duly notarized, if applicable)

• Power of attorney (As per prescribed format on Rs. 200 non-judicial stamp paper duly notarized, if applicable)

• NTN certificate (optional).

ACCOUNT OPENING PROCESSIn case of a corporate entity:• Certified true copy of Memorandum and Article of Association/By laws/Charter

(relevant documents where applicable). • Certified true copy of the Board Resolution • Certified true copy of Certificate of Commencement of Business (if applicable). • Certified true copy of the Certificate of Incorporation (if applicable).• Certified true copy of registered trust deed (in case of trust)(If the trust is not registered, please provide certified true copy of income tax exemption certificate or NTN certificate.)• Specimen Signature Card• Power of attorney (if applicable). • NTN certificate (optional). • Copies of CNICs/NICOP/Passport of authorized signatory(ies)• Certified true copy of list of directors • In case of foreign corporate entity, all documents must be attested by notary public

of respective country and also attested by the nearest Consulate Office of Pakistan.

STATISTICS

Performance at a glanceJune 30,

2011June 30, 2012

February 28, 2013

Number of shares in CDS (in Bn) 83.83 99.17 104.51

Market Capitalization of shares in CDS (in Trillion)

1.659 1.874 2.414

% of shares in CDS w.r.t. total share capital (Exl.GOP)

83.57% 85.36% 85.55%

Total number of Investor Accounts 52,986 47,943 48,070

Number of Securities in Investor Accounts (in Bn)

34.332 38.230 39.401

TRUSTEE & CUSTODIAL (T&C)• The prime responsibility of CDC as the trustee/custodian is to

take into its custody all the assets of the Collective Investment Scheme/funds and hold them in trust on behalf of the unit/certificate holders.

• Additionally, CDC carries out the instructions of the asset management company/investment adviser/pension fund managers in respect of the investment portfolio and the units/certificates held by the investors, while ensuring that, in all material respects, the scheme is being managed in accordance with the provisions of the constitutive documents, the NBFC Rules, the Regulations and VPS Rules.

SCOPE OF T&C SERVICES

The services undertaken by CDC as the Trustee/Custodian are as follows: • Transaction Settlement• Nominal Ownership of the Assets• Compliance with Regulatory Requirements• Corporate Actions• Portfolio Reporting• Tax Reporting

SHARE REGISTRAR SERVICES (SRS)

• CDC offers Share Registrar Services (SRS) (also known as Transfer Agent or R/TA services) to facilitate Issuers and their shareholders. This initiative was taken in early 2008 to cater to the growing need of more comprehensive and efficient SRS in the Pakistani Capital Market.

• Currently, CDC – SRS is the most comprehensive and efficient Share Registrar / Transfer Agent Services in the market. By providing a synergy between depository and share registrar services and through a combination of state-of-the-art service features, CDC has raised the bar of service excellence in the financial services industry.

SCOPE OF SRS SERVICESFollowing is the scope of services that would be provided under the umbrella of CDC – SRS. • Maintenance of computerized Members’ Register • Maintenance of specimen signatures of shareholders • Dealing with Security holders on SRS Counter, telephone, through mail and E-mail. • Verification of Security holders’ signatures on Transfer Deeds and Proxy Forms etc. • Physical Transfer of Securities, Deposit of Securities into CDS, Withdrawal of Securities from CDS and

transmission of physical certificates / Securities etc.• Issuance of duplicate certificates and dividend warrants against appropriate indemnities and fulfillment

of formalities • Split / Consolidation / Renewal of certificates • Dividend Entitlements and Payments to Security holders • Bonus Shares issuance to Security holders with fractional shares payment • Custody of undelivered certificates and dividend warrants, etc. • Preparation of reports related to the securities and Security holders for filling with Issuers / Regulators.• Taking attendance of Security holders in Annual General Meeting (AGM) / Extra-Ordinary General

Meeting (EOGM) • Compliance of legal obligations as Share Registrar / Transfer Agent• Other standard Share Registrar department activities such as dispatch of Annual / Half Yearly Accounts,

etc. • They also have future plans of handling the following transactions (IPO handling, Registrar Services to

Open Ended Mutual Funds)