I. Definition The third-party depositary business for customer transaction settlement funds of securities companies (multi-bank model), or third party depositary business in short, is an innovative bank-securities cooperation service launched by ICBC to support reform of the customer transaction settlement fund depositary system of the Chinese securities market.
II. Introduction The securities company, as bookkeeper of the customer funds, keeps the customer data, deposits full amount of customer funds with the custodian bank in a different ledger account from its owned funds, and accepts the customer’s entrustment to handle the securities transaction. It then completes the clearing and delivery between the depository and clearing company and the customer, and provides details of the customer funds to the custodian bank. The custodian bank performs the duty as cashier and custodian of customer funds, provides deposit and withdrawal services and alternative inquiry mechanism for the customer through reconciliation between the general and sub ledgers, and effectively prevents the securities company from embezzling the customer funds. Relying on the advanced electronic banking and powerful back-office service system of ICBC, investors are able to conveniently transfer third party depository funds between their bank and securities accounts through online banking and telephone banking, inquire about the fund balance and changes in a real time manner, and timely and independently supervise their margin deposits at the securities company, therefore significantly improving the fund safety.
III. Targets Securities companies of innovation pilot, standard and risky categories.
IV. Features and Advantages i. Close-loop operation of customer funds. Under this model, the securities company transfers the customer deposit/withdrawal function to the custodian bank, and no longer handles any form of deposit/withdrawal business. All of the deposit and withdrawal behaviors will be originated by the customer through bank-securities transfer, and the settlement funds withdrew by the customer should be first transferred to the customer’s preserved same-name bank settlement account. In such a way, the third party depositary business realizes the close-loop operation of transaction funds, hence prevents the customer funds from being embezzled and avoids the risks of money laundering and cashing. ii. General-sub ledger reconciliation at the custodian bank. Under this model, the custodian bank opens a management account for the customer to map his/her balance on the fund account of the securities company, and thereby obtains details of their accounts. By summarizing the account details and reconciling it with the general ledger at the securities company, it prevents fund embezzlement by the securities company on the level of general ledger. iii. Alternative inquiry & reconciliation mechanism for customers. Under this model, the custodian bank provides alternative inquiry service regarding the customer’s management account, and the customer uses the inquiry means and reconciliation mechanism provided by the custodian bank and the securities company to check the consistence between the management account at the custodian bank and the fund account at securities company, therefore effectively monitoring the safety of customer funds. iv. Comprehensive customer fund supervision system. Under this model, the securities company, custodian bank, customer and regulatory department jointly set up a comprehensive supervisory system for the customer funds through reasonable division of labor and institutional arrangement, to ensure the safety of customer funds. The custodian bank is neither directly responsible for the customer’s liabilities, nor directly controls the legal person delivery operation of securities company. It only reconciles the general and sub ledgers and provides alternative inquiry services for the customer, thereby playing an assistance and supervisory role to some extent. v. The multi-bank depository mechanism helps to meet the customer’s different preference for banks and is highly compatible. It is able to smoothly meet the clearing and delivery rules of existing securities transaction products in China, and adapt to the future product innovation and institutional improvement in the securities market.
V. Handling Procedures i. If you haven’t enabled any bank-securities transfer business with ICBC, the third party depository business shall be handled pursuant to the following procedures: 1. Designate the custodian bank at the securities company The customer shall present his/her valid ID card and open a securities margin deposit account at office of the securities company, designate ICBC as his/her fund custodian bank, and sign the Agreement on Bank Depository for Transaction Settlement Funds of Customers in writing or online. 2. Confirm the establishment of depository relationship at ICBC outlet: (1) Over the counter: The customer shall present his/her valid ID card, securities fund card, ICBC savings card or passbook (the customer may open a savings card or passbook at an ICBC outlets if he/she doesn’t have any), and the Agreement on Bank Depository for Transaction Settlement Funds of Customers signed with office of the securities company, and fill out the Application for Enabling Third Party Depository Business at an ICBC outlet to confirm establishment of the depository relationship and enable the service. (2) Self-service registration: ICBC offers the online self-service registration of third party depository service for the customer that has opened a securities account with the securities company, and allows the customer to bind his/her securities account with the bank account. You will only need to sign the third party depository tripartite agreement through online banking to finish the procedures of opening third party depository service for transaction settlement fund by yourself, and bind the securities fund account with your bank settlement account. (3) Activation via first bank-securities transfer: ICBC offers the online first bank-securities transfer to enable third party depository services for the customer that has opened a securities account with the securities company, and allows the customer to bind his/her securities account with the bank account. You will only need to carry out the first bank-securities transfer through online banking or telephone banking to enable the third party depository service for customer transaction settlement fund by yourself, and bind the securities fund account with your bank settlement account ii. As for those that have enabled bank-securities transfer, bank-securities link, single bank third party depository service with ICBC, pursuant to the requirements of the China Securities Regulatory Commission, existing customers of bank-securities transfer, bank-securities link and single bank third party depository service need to enable the multi-bank third party depository service in stages through batch transfer. Please confirm the handling procedures at office of the securities company. In addition, customers may also check the information released by the securities company on its website.
Note: Information on this page is provided for reference only. Please refer to announcements and regulations of local outlets for details.