Things to keep in mind.

• Investment - securities accounts.
• Investment - verbal orders.
• Investment - unit trusts.
• Proxy on account.
• Volatile markets.
• Physical delivery of securities.

• Investment – securities accounts.

Transfers of open securities accounts from one credit institution to an other often take a lot of time and involve charges.
The advice given by the Mediation Service to customers is to gather ample information about both these aspects beforehand.

 

• Investment – verbal orders

Verbal orders can often be the cause of a dispute between the financial institution and the customer. Misunderstanding can be avoided to a large extent if the customer gives a written confirmation afterwards.
This is one of the cases in which the general rule stating that allegations must be proved, applies.

 

• Investment – unit trusts

Unit trusts are very popular among investors. There may be some misunderstanding about the new stocktaking value when units are sold or bought. The value which is published, already is a historical value and does not reflect the value of the unit which is being traded. Be sure to be well informed before taking your decision !

 

• Proxy on account

The holder of a bank account (call deposit account, savings account, …) can authorise a third person to make transactions using his account. This may apply to a single transaction but also in general and without any time restriction. The general regulations governing transactions lay down the maximum period of time for the coming into effect of proxy cancellation : cancellation of a proxy can be done only by means of a written statement.

There is no need for the principal to justify the cancellation of the proxy neither to the bank nor to the person who had been authorised. The proxy is still valid even if it is rarely or not at all used by the latter. Neither does the proxy lose its validity when the account is kept with an other bank.

There is no obligation for the bank to ask the principal repeatedly if he wants to maintain the proxy. This is something for which the customer bears the responsibility. It is up to the customer to inform the bank, in writing, of any changes he would like to make to the proxy list with respect to his accounts.

In those cases where the proxy covers several accounts, it still applies to the remaining accounts when one account has been settled. The person who had the authorisation, no longer has the right to inspect the transactions pertaining to the account once the proxy has been cancelled. The proxy is no longer valid when the principal dies.

 

• Volatile markets.

The Mediation Service regularly has to deal with complaints about orders which have not been executed by a stockbroking firm or a bank in a volatile market (Easdaq, Nasdaq, etc.).

Although the rate indicated by the customer has been reached, the order is not executed. Quite logically, the customer wants to know the reasons for this. These markets however, are price driven instead of order driven unlike the other regulated European markets.

The functioning of these markets depends on the active role played by the market makers, who show on the screens the prices at which they are prepared to buy (bid prices) or sell (offer prices) some share packages. However, the prices displayed do not imply that transactions actually have taken place at these prices. Any price indication always depends on a number of securities.

Moreover, the bid to buy or sell a number of securities at a given price is valid only for a very limited period of time, often no more than a few seconds. Even if a market maker succeeds in putting the shares on the market at the limit price, that does not mean automatically that the advantage yielded by this transaction must go to the customer.
The selling orders indeed are always allotted as follows : first the non-limited selling orders, then the selling orders with the lowest limit and finally, those with the highest limit.

 

• Physical delivery of securities

In Belgium, many investors in securities explicitly ask to have them delivered physically. Although a securities account offers the possibility of putting these documents under the management of the bank (i.e. the stockbroking company), many investors prefer keeping the securities by themselves.

This may cause problems when the documents are stolen or lost. One can react by referring to the regulations governing involuntary dispossession of securities, but this is a very complex procedure and it may take a lot of time.

Indolence can put the holder of securities before unpleasant surprises. Sometimes, the holder has forgotten to return, change, etc. his securities. He has no right to blame the financial institution for this, e.g. by saying that it failed to warn him. It is not up to the bank to inform the holder, for the latter himself indeed has opted for physical delivery. How could the bank possibly know who is the holder of the securities, since in most cases, these securities will be bearer securities and hence they will be readily transferable.