Certificate delivery rules tightened

Press, 26 September 1989, Page 27

Certificate delivery rules tightened

By TIM PRESTON, partner, Hamilton, Hindin, Greene There have been a number of very important advances made by the New Zealand Stock Exchange during the past three years. Perhaps one of the most significant (as far as investors are concerned) has been the tighening up of delivery rules. Gone are the days where clients are having to wait for as long as two years for share certificates. Most documents are now being delivered within six days. This means in many cases clients are receiving certificates within four weeks of their purchases. This improvement has meant, however, that investors have had to take a more responsible attitude, especially when selling shares. Brokers can be fined for not delivering documents in time and where clients are to

blame, this cost is often passed on. To avoid such situations, the following ground rules should be observed:

Make sure you have all your share certificates on hand. If any are missing, advise your broker. He will make inquiries with the registry and arrange for a replacement if necessary.

Check your certificates are all for the same class of share. A number of companies have different forms of capital such as ordinary shares, options and preference shares. The certificates are often similar.

When you receive a transfer form for a sale, make sure this is signed and returned with your certificates straight away. If you want to put a selling order in and are going away, inform your broker. He will probably ask you to bring in your certificates and pre-sign a

transfer. Make sure you give clear instruction on how many shares you are selling and double check to ensure the order has been taken correctly. If a mistake is made, advise your broker straight away so he can rectify the problem as soon as possible.

Be careful when companies have capital reconstructions or name changes. Often new certificates are sent out replacing the old ones which are supposed to be destroyed. Many people often forget to do this and end up selling too many shares at a later date.

If you are unsure about anything, do not be afraid to ask. It is better to stop problems before they occur rather than try to fix something at a later date. It is not only sellers of shares who have had to tighten up their procedures, buyers have also had to change their habits. With documents

being' delivered so quickly, most brokers are insisting on immediate payment for purchases. Payment on receipt of a contract note is now the accepted — and expected — norm in the industry.

In the case of Government stock deals, a settlement date is specified and this must be strictly adhered to.

To anyone unfamiliar with the sharemarket, the tightening up may be seen as inhibiting rather than encouraging investment. But for those who have dealt under both systems the benefits of the new system far outweight any disadvantages.

Investors are now able to buy and sell confident ally knowing registrations and settlements can take place quickly and efficiently. Sharebrokers are able to spend more time advising and helping clients rather than chasing up queries about outstanding certificates.