What are CDIs?A CDI is a financial product which is a unit of...

What are CDIs?

A CDI is a financial product which is a unit of beneficial
ownership in an underlying financial product which is quoted
on the ASX market. A CDI confers a beneficial interest in
the underlying financial product to which it relates.
CDIs can be settled electronically through CHESS and are
used when the underlying financial products are not able to
be settled through CHESS.

For example, if a foreign company issues CDIs in respect
of its shares (financial products), the holders of the CDIs
obtain “beneficial ownership” of those foreign financial
products. The main difference between holding CDIs and
holding foreign financial products directly is that you have
beneficial ownership of the equivalent number of foreign
financial products instead of legal title. Legal title to the
foreign financial products is held by a nominee company on
behalf of CDI holders.
There are three types of CDIs:
•
CHESS Units of Foreign Securities (“CUFS”), which are
issued in respect of foreign equity securities;
•
Depositary Interests (“DIs”), which are issued in respect
of bearer securities (such as debt) or where the
securities are held in another settlement and depositary
system; and
•
Government Bond Depositary Interests.
The term “CHESS Depositary Interest” (or “CDI”) is a
collective term that may be used to refer to any or all of
these. Whether you hold CUFS, DIs or Government Bond
Depositary Interests, you derive your beneficial interest in
the relevant foreign equity, debt or other security through
one or more nominee companies, known as depositary
nominees.
2
CHESS Depositary Nominees services
CHESS Depositary Nominees Pty Limited (“CDN”) is a wholly
owned subsidiary company of ASX Limited (“ASX”) that was
created to fulfil the functions of a depositary nominee.
CDN is authorised by its Australian Financial Services
Licence to operate custodial and depositary services, other
than investor directed portfolio services, to wholesale and
retail clients.
CDN can be appointed by any issuer to hold legal title to
financial products on behalf of CDI holders for their benefit.
CDN is a participant in the clearing and settlement facility
operated by ASX Settlement Pty Ltd (“ASX Settlement”).
Whilst CDN is often selected as the nominee for ASX CDIs,
an issuer may appoint another company as its depositary
nominee.
CDN receives no fees from investors for acting as the
depositary nominee in respect of CDIs.
ASX receives various service-based fees from issuers and
registries regarding financial products that are listed on
ASX where CDIs are issued.
What entitlements do my CDIs have?
With the exception of voting arrangements and some
corporate actions of foreign issuers domiciled in certain
jurisdictions (explained below), as a CDI holder you have
the same rights as holders whose financial products are
legally registered in their own name. This means that all
economic benefits such as dividends, bonus issues, rights
issues, interest payments and maturity payments or similar
corporate actions flow through to you as if you were the
legal owner of the corresponding financial product.
In relation to corporate actions regarding shares, such as
bonus issues, rights issues and capital reconstructions,
CDI holders will generally receive equal treatment to that
of holders whose financial products are legally registered
in their own name. This is because foreign issuers are
generally required to treat CDI holders as though they were
the legally registered holders of the corresponding foreign
financial products.
3
However, in the case of shares the laws of some countries
may not permit foreign issuers incorporated there to treat
CDI holders as though they were the legally registered
holders of the corresponding foreign financial products
for all purposes. For example, such laws may require the
foreign issuer to treat the depositary nominee’s holding of
foreign financial products as a single holding, rather than
as a number of smaller separate holdings corresponding to
the individual interests of CDI holders, for the purposes of
certain corporate actions.
The effect of such laws is that, on bonus issues, rights
issues and other corporate actions (such as share
consolidations), marginal differences may exist between the
resulting entitlements of CDI holders and the entitlements
they would have accrued if they held foreign financial
products directly.
Examples of differences in entitlements
Such differences may exist when fractional entitlements
arising on a share consolidation are rounded. If the
fractional entitlements are to be rounded up, and the
laws applicable to the foreign issuer require it to treat the
depositary nominee’s holding as a single, undivided holding,
then CDI holders will not benefit to the same extent from
the rounding up of fractional entitlements than if they held
foreign financial products directly.
The difference will exist because any fractional entitlement
arising in respect of the depositary nominee’s single,
consolidated holding is rounded up only once; on the other
hand, if CDI holders were treated as though they held
foreign financial products directly, fractional entitlements
arising in respect of each of their notional holdings of
foreign financial products would be rounded up, leading to a
greater aggregate rounding up for CDI holders.
Any such differences in entitlements will be explained to CDI
holders by the relevant foreign issuers. ASX operating rules
require foreign issuers to minimise such differences where
legally permissible.
4
In relation to a takeover offer for any of the foreign issuers
in which the depositary nominee holds foreign financial
products, the depositary nominee may only accept the offer
where CDI holders instruct it to do so and it must ensure
that the offer or processes the takeover acceptance.
In relation to meetings of a foreign issuer, you will be given
notice of any meeting of a class of holders applicable to you.
The notice must include a form permitting you to direct the
depositary nominee to cast proxy votes in accordance with
your written directions. Unless the laws of the jurisdiction
in which the foreign issuer is established permit it, you
cannot vote personally at a meeting of holders. If you wish
to vote personally, you must first convert your CDIs into the
underlying foreign financial products in sufficient time before
the meeting to enable you to vote personally.
How do I know if a quoted financial product
is a CDI?
A financial product is a CDI if the ASX official description
contains a reference to “CHESS Depositary Interest” or
“CDI”. For example, “NWS, Class B Common Voting Stock
– cdi” refers to CDIs issued by News Corporation in respect
of its Class B Common Voting Stock and listed on the
Australian Securities Exchange.
Your broker can provide you with a current listing of CDIs.
Can I convert my CDIs?
Shares in foreign domiciled companies
You may choose either to leave your holdings in the form
of CDIs (so that legal title remains in the name of the
depositary nominee) or convert the CDIs into financial
products (so that you can hold legal title in your own right).
If you wish to convert your CDIs to underlying financial
products, you should either contact the foreign issuer’s
Australian registry if you hold issuer sponsored CDIs, or
your Broker (referred to in CHESS as your Sponsoring
Participant) if your CDIs are held on the CHESS sub register.
5
You may also wish to convert your underlying financial
products to CDIs. If so, you should contact the foreign
issuer’s share registry, or if you wish to be sponsored in
CHESS, your Broker for assistance. The underlying financial
products will then be transferred from your name into
the depositary nominee’s name and a CDI holding will be
established in your name.
CDIs can be issued on a ratio basis whereby each CDI
represents a multiple or a fraction of the underlying foreign
financial products. The number of CDIs or foreign financial
products that you receive upon conversion of one form
of financial product to the other is determined by the
applicable ratio.
Government Bond Depositary Interests
The nature of Government Bonds means there are special
rules and you should consult your broker, ASX Customer
Services or the Australian Government website (
www.
australiangovernmentbonds.gov.au
).
How will I know what’s happening with my
CDIs?
Under the operating rules of ASX Settlement, the
depositary nominee has appointed each financial product
issuer as its attorney to carry out the functions of the
depositary nominee in order to give full effect to all of the
depositary nominee’s rights and obligations in respect of
the CDIs. This means that the financial product issuer,
usually through its registry, will communicate directly with
you when processing corporate actions such as dividends,
bonus issues, rights issues or interest payments and when
sending notices and announcements, such as notices of
meetings of holders. Any enquiries on such matters should
be directed to the relevant registry or your Broker.
Do I get CHESS Statements for CDIs?
CDI holders who are sponsored by Participants in CHESS
will receive CHESS Holding Statements similar to those for
direct holdings each time there is a movement of securities
on their holding.
6
CDI holders who are Issuer Sponsored will receive
uncertificated holding statements from the company’s
Australian registry.
Am I covered by the National Guarantee Fund?
As a holder of CDIs, you may be entitled to make a claim
on the National Guarantee Fund (NGF) where any of the
circumstances set out in Division 4 of Part 7.5 of the
Corporations Act apply to you.
The National Guarantee Fund is administered by a trustee:
Securities Exchanges Guarantee Corporation. Information is
available from its website at
www.segc.com.au
How can I make a complaint about CDN?
If a CDI holder has a complaint regarding the services
of CDN, they should contact CDN so that it has the
opportunity to resolve the problem. The complaint and all
supporting documents can be lodged either by email to
[email protected]
, or by writing to:
The Manager
Chess Depositary Nominees Pty Ltd
Level 4, 20 Bridge Street, Sydney NSW 2000
or, by completing and forwarding an ASX complaint form by
email or facsimile to (02) 92270695.
If a CDI holder is not satisfied with the steps taken by
CDN to resolve the complaint, or with the result of CDN’s
investigation, a CDI holder may lodge a dispute with the
Financial Ombudsman Service Ltd. A dispute can be lodged
online or by hand. For further information see www.fos.org.
au or phone 1300780808.
Compensation arrangements
In addition to the National Guarantee Fund mentioned
above, CDN has professional indemnity insurance
arrangements which meet its obligations as the holder of
an Australian Financial Services Licence to cover claims
relating to its services.