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Thread: Overviews : What do nominees mean in the world of stocks?

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    Default Overviews : What do nominees mean in the world of stocks?

    What is a Nominee?

    NOMINEE - is the practice of borrowing a name, namely by using the name of a person who is a domestic citizen so that he acts as a shareholder in a local company, as a limited liability company or even as owner of land, buildings and other property. Nominees are often called Nominee Arrangements and are often carried out by foreign nationals to own local shares, land or property that is in the local country.

    Nominee Arrangement

    Nominee in the world of shares is the practice of borrowing names, namely ownership of shares using someone else's name, so that the actual owner of a share is not registered in the share ownership register, what is recorded is the name of another person who has previously entered into a name loan agreement on the ownership of a company, so Even though a person's name is registered as the owner of a share, in fact the person in control over the shares is another person through an agreement between the owner of the capital to buy shares and the person whose name was borrowed to buy shares.

    In the Nominee Arrangement there are two parties, namely the party whose name is borrowed which is called the nominee, and the beneficiary, namely the person (party) who appoints the nominee often, the nominee is the party who legally owns shares, while the beneficiary is the party who benefits from the action that This is carried out by the nominee party, legally the nominee has the right to do anything over the shares whose ownership is in his name, but through a certain agreement the nominee must obey the instructions and wishes of the beneficiary.

    Is this nominee practice legal?

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    If in Indonesia and several Southeast Asian countries it is clearly prohibited by law, then what about the nominee practice in other countries? nominee practices abroad are not necessarily prohibited. For example in offshore countries. if there is a party or company that wants to submit a nominee, in Europe it is regulated and there are regulations up to the consequences.

    This nominee practice has been around for a long time. However, this nominee practice is still a form of legal smuggling. It's just that different countries have different regulations. This practice has its benefits, but the risks are no less. There have been many cases where this nominee practice has become a boomerang for real name owners.

    Conclusion About Nominees

    Nominees are actually prohibited, this nominee is a practice of legal smuggling so all Nominee Arrangements are not legally enforceable and are null and void, the agreement between nominees and beneficiaries is not legally enforceable, the agreement is only used to frighten Nominees but also Nominees violate the agreement. The beneficiary cannot do anything because the agreement has no legal force.

    In the company structure this nominee is not known, if it turns out that nominee practice is found, other shareholders who feel aggrieved can file a lawsuit against the resolution of the GMS, the board of directors and the board of commissioners, and nominees who own shares do not have voting rights in the company's GMS and are not counted in quorum determination.

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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    The definition of a nominee in the world of shares

    Nominee in the world of shares or better known as a nominee agreement is an agreement for the owner of capital to invest in shares where the investment registration is not made in the name of the owner of the capital but uses another name for the benefit of the owner of the capital. If judging from this definition, there are things that are hidden by the owners of the capital in carrying out their investment activities. If something is hidden then there will be things that you don't want to know which eventually refer to irregularities in it.

    Are nominees legal?
    Now, if we want to find out whether this agreement is legal or not, then we must hold the principle of the existence of certainty or existing legal basis. In Indonesia, this practice is written in Law 25/20017 concerning investment. In the market 33 paragraphs 1 and 2 have regulated the prohibition of these practices, where if these practices occur, there will be misuse of the rules that are the object of the regulation. Therefore, this practice is either strictly prohibited or illegal.

    One example of this practice that has been mentioned by TS is the mega case of the Jiwasraya scandal where the Attorney General's Office has uncovered this case where there are two names of shareholders who are actually owned by the suspect in the Jiwasraya case. After further examination based on the flow of transactions, it turns out that the shareholders or owners of capital are actually owned by foreign parties who entrust their funds to the suspect in the Jiwasraya case who owns a company in the investment sector.

    The consequences of this practice are very dangerous because this practice will result in deeper losses, not only focusing on illegal nominee practices but continuing to the practice of corruption and money laundering. In this case, it turns out that in addition to investing in shares, there is another flow of funds in the form of the use of these illegal assets for the purchase of property such as land and houses, which in turn causes losses to the state in the form of loss of the amount of taxes that must be received by the state.

    Nominee Accounts and Foreign Shares

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    A stockbroker does not usually take direct control of an investor's foreign securities. The brokerage uses a third-party custodian, usually a division of the large global bank that offers the service. However, some international brokers have local subsidiaries that handle custody of some or all of their markets.
    Bank assets in custodian are separated from general operations. While there is a possibility that global banks could fail, the broad consequences are likely to result in a bailout, hedging the value of investors' assets. However, in smaller emerging markets, custodians without local divisions may use sub-custodians to hold shares on their behalf. If the sub-custodian faces bankruptcy, the main custodian may not be responsible for the lost assets of the sub-custodian.

    Nominee Account and Investor Safety

    Although regulators and exchanges regularly review nominee accounts, the process is not carried out every day. Because stockbrokers can move or sell shares from a nominee account at any time, fraud can occur. Incidents like this are very common when a company is facing bankruptcy and needs cash or assets to meet its obligations. Stock brokerage records are subject to change, increasing the difficulty of determining which investors own assets in nominee accounts.

    The brokerage does not usually have separate accounts for each individual, but rather a combined account of multiple customers which gives them a platform to mix up the assets.

    Nominee Account and Investor Compensation
    Most of the major stock markets offer investor compensation, covering assets held by stockbrokers. Investors are compensated up to a certain amount if any assets are lost from their accounts and the broker cannot offer the difference in cash. Investors with a larger share value are encouraged to have accounts with multiple brokers because it is impossible for all brokers to fail simultaneously and investors are entitled to get a bigger profit than if a nominee account was with one broker.

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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