• Sat
  • Oct 25, 2014
  • Updated: 4:06pm

Public shuns service because of fees

PUBLISHED : Friday, 03 July, 1998, 12:00am
UPDATED : Friday, 03 July, 1998, 12:00am
 

Hong Kong Clearing is considering scrapping monthly fees on direct-investor accounts in response to a surprising lack of interest in the scheme, introduced in May to help investors avoid losses caused by brokerage collapses.


In the wake of the collapse of a number of retail brokers this year, it had anticipated a rush of investor interest in the accounts, which offer a potentially more secure alternative to allowing brokers to hold the scrip and more convenient than keeping it at home.


Hong Kong Clearing had installed capacity to handle 5,000 accounts in the Central Clearing and Settlement System (CCASS), but so far only 688 accounts have been opened since the scheme was introduced on May 8.


A spokesman admitted investors had complained that the monthly $200 fee was excessive.


'The feedback from some investors has been that the fee is too expensive, especially in this market,' the spokesman said. 'We were hoping more people would use them but we are aware that it always take time for good words about a new service to spread,' the spokesman said.


Investors are required to pay the $200 fee unless their transaction fees exceed that amount.


Sources said the fee was likely to be scrapped, and levied only if investors failed to use the accounts in a 12-month period.


Brokers have boycotted the accounts because they deny them access to scrip if a customer's cheque bounces.


'If brokers were to start recommending them to clients you would have 50,000 accounts overnight,' one broker said.


The Hong Kong Clearing spokesman said a review of the fee structure was underway which also would consider the future development of the scheme.


Brokers have called for a 'half-way house' for scrip to be lodged while awaiting the clearing of clients' cheques.


'The present scheme protects clients but it does not protect brokers,' a broker said.


Before the introduction of the scheme only brokers or custodians could open accounts in CCASS.


The collapse of brokerages, such as CA Pacific and Forluxe Securities, prompted waves of protests from investors who had believed scrip had been safe in the hands of their brokers.


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