Securities deposit refers to the act of entrusting securities for safekeeping and exercise of rights. When investors deposit securities with participants (securities companies or other financial institutions), KSD provides services including custody, settlement of transactions, and exercise of rights for the deposited securities.
Types of securities deposit and deposit-eligible securities
Types of securities deposit
|General Deposit||Once a participant with securities deposited by investors records the details in the investor's account book, the participant then deposits the securities into KSD. Securities belonging to the participant are held in the proprietary account, and those held on behalf of investors are held in a separate investors' account.|
|Fictitious Deposit||Securities deposited with the participant by investors are deemed to be deposited with KSD at the time their details are recorded in the investor's account book. In case those securities are lost before their entrustment to KSD, KSD and participants will bear joint responsibility for their loss.|
|Blanket Deposit||When an issuer makes a public offering or sale, the underwriters and subscribers can apply to have the securities issued in the name of KSD, and then delivered and deposited into KSD. In case of bonds, the deposit is processed through the receipt of a certificate of registration from the issuer's registrar.|
|Rights Deposit||In case of blanket deposit, securities are issued in the name of KSD. In this case, their details are recorded in participant account book at a certain point in time (the day after the payment date or after the right allocation) before the issuance of stock certificates and are managed by KSD.|
|Agent deposit||In the case of receiving new shares due to change of company name, reverse stock split or bonus issue, if a registered stockholder requests the new shares to be deposited into its brokerage account without the issuance of physical certificates, the transfer agent will deposit the shares directly into KSD without the intervention of the participant.|
- Listed securities and collective investment securities
- Listed bonds and non-listed bonds issued in a series of listed bonds but with different date of sales
- Bonds which registrar is KSD or BOK
- Shareholder certificates issued by the exercise of rights on deposited securities, subscription rights and warrants
- Commercial papers (CP) and certificates of deposit (CD)
- Securitized derivatives, etc. which are recognized of the necessity by KSD
Procedure of securities deposit
Deposited securities are recorded in the account book. Accordingly, rights including ownership are transferred without the actual movement of certificates. KSD exercises rights on behalf of investors, receiving and distributing dividends, bonus stocks, and new stocks by paid-in capital increase.
Benefits of the securities deposit system
- Efficient securities management through fungible custody
KSD keeps and administers deposited securities in a fungible pool according to security type and issue. Participants have pro rata co-ownership in lieu of individual ownership. The transfer of the rights on deposited securities, including those resulting from buy/sell transactions is made through book-entry transfer.
- Improved clarity of rights by recording and maintaining investor's account book
Account books are legal ledgers maintained pursuant to the Financial Investment Services and Capital Markets Act. Rights such as the right of possession, delivery by book-entry transfer, effectiveness against third parties through the creation of a pledge or trust, and right to withdraw deposited securities are recognized at the point of time KSD makes the entry in investor's account book.
- Enhanced shareholder protection through non-bearing of share certificates
Since transfer can be effected simply by delivery of share certificates, there is a possibility of a third party's good faith acquisition of lost stock certificates. Accordingly, KSD manages deposited securities in a share certificates non-bearing form, protecting shareholders from the risk of losing their shareholder status.