How to find a stockbroker

(continued from last week)

Who is a Stockbroker?

A stockbroker is a firm that acts as an intermediary for stock market transactions, offering investors a variety of services in addition to executing buy and sell orders of investors. The stockbroker's fee is the brokerage.

There are 15 stockbroker firms and 3 trading members at the Colombo Stock Exchange (CSE). They are governed by the regulations set out by the CSE and Securities and Exchange Commission (SEC).

What services do they provide?

It is mandatory for you to obtain the services of a stockbroker in transacting in the secondary market.

Intermediation

* Portfolio Management

* Execute and conform buy/sell transactions

* Advise and facilitate takeovers and mergers

* Sponsoring listing applications for companies

* Investment advice

* Follow-up on defaulters

* Settlement of transactions - T + 3 & T + 4 for Equities and Delivery vs Payment (DVP) for Corporate & Government debt

Client Registration

* Opening of Securities Accounts

* Deposit of Securities

* Withdrawal of Securities

* Transfer of Securities

* Generation of Contract Notes

* Attending to the Documentation

* Settlement of Transactions

Providing Information

* Assistance and information dissemination with regard to new issues

* Research and reports on the performance of listed companies and their securities

Qualities of an Investment Advisor

The stockbroker should act in the client's best interest. Therefore, he should possess the following qualities.

* Competence

He should be qualified and experienced and have a thorough knowledge of market behaviour. Your broker should be certified by the CSE and hold the Investment Advisor Certification.

* Integrity

The stockbroker should give fair treatment to his clients, and not for his personal gain. He must account for all transactions properly.

* Knowledge about "what's happening around"

The broker should possess knowledge on the needs of the client, market behaviour and Political, Economic, Social and Technological factors.

* Forecasting

This is the process of analysing current and historical data to determine future trends. Stock analysts use various forecasting methods to determine future stock price movements, earnings, etc.

What are their fees?

All brokers charge the same commission for Equity trades up to Rs. 100 Mn. Equity trades above Rs. 100 Mn and all corporate debt trades have negotiable rates of commission.

What research services are offered?

Most brokers have a research unit that studies the market in general and specific companies in particular.

With this research they are able to recommend shares for you to purchase. They publish research in the form of:

* Sector Reports

* Daily and Weekly Reports

* Company Specific Reports

* Daily Valuations Report

The broker makes recommendations to the best of his ability and should not be liable in case the recommendation is found to be incorrect.

Investor complaints

If you have a complaint, first inform the Compliance Officer of your broker firm. The Compliance Officer should be able to help you and resolve the complaint.

If you are not satisfied you can forward your complaint to the CSE for investigation.As a final step you can forward your compliant to the SEC who have statutory authority to investigate complaints.

Members of the CSE

Asha Phillip Securities Ltd, Asia Securities (Pvt) Ltd, Bartleet Mallory Stockbrokers (Pvt) Ltd, Ceylinco Stockbrokers (Pvt) Ltd, CT Smith Stockbrokers (Pvt) Ltd, DFCC Stockbrokers (Pvt) Ltd, DP Global Securities (Pvt) Ltd, HNB Stockbrokers (Pvt) Ltd, JB Securities (Pvt) Ltd, John Keells Stockbrokers (Pvt) Ltd, Lanka Securities (Pvt) Ltd, Lanka Orix Securities (Pvt) Ltd, NDBS Stockbrokers (Pvt) Ltd, SC Securities (Pvt) Ltd, Somerville Stockbrokers (Pvt) Ltd.

Trading Members

Capital Alliance Holdings Ltd, National Wealth Corporation Ltd and Seylan Merchant Bank Ltd.

(To be continued next Tuesday)