What are the benefits of using a custodian?
At Superhero, we could follow the legacy brokers and use the system the ASX is desperately trying to replace. Instead, we carefully selected a custodian model to serve our customers better. Here’s why:
Low pricing and transparent fees: We’re all about keeping things affordable and our fees in plain sight. By adopting the custodian model, we strip out unnecessary ASX fees that other brokers may choose to pass onto you in one way or another. We’re committed to offering a clear and sustainable fee structure from the start.
Reducing communication overload: We understand that frequent investors can receive an overwhelming amount of communication containing their holding details from CHESS—sometimes up to 50 letters a month! With Superhero, we manage and consolidate these communications on your behalf, giving you a hassle-free, paper-free investing experience.
Globally recognised model: Having a custodian is the globally-accepted operating approach used by most Australian superannuation funds but also by other reputable market players like IG Markets, Interactive Brokers, Spaceship, Pearler Micro and Stake (for U.S. shares).
Compliant with U.S. operations: U.S. shares cannot be held in your name under a “CHESS-sponsored” arrangement as CHESS is an ASX-only system. Therefore, a custodian is used to safeguard your U.S. shares while offering you the full benefits of ownership.
Seamless participation in corporate actions: Superhero can facilitate your participation in company offers directly. If you’re an eligible shareholder, we’ll promptly deliver the offer information to your email inbox for you to participate in things like share purchase plans and entitlement offers.
If Superhero goes out of business, what happens to my shares?
Rest assured, the shares held in your Superhero account are exclusively yours and legally cannot be accessed by anyone but you, including by any claims from creditors. As the beneficial owner of your shares, only you are able to exercise any rights attached to the ownership of those shares.
Your peace of mind is our priority, and if Superhero were to discontinue its business operations for any reason, your shares could be transferred from Superhero to another broker and would continue to be held by FinClear. As an authorised sub-custodian, FinClear are required to have adequate financial resources in place to provide their services to you and afford you with the necessary regulated investor protections should anything go wrong.
How are my U.S. shares held and protected?
The U.S. shares you hold in your Superhero Account are held by Apex Clearing Corporation LLC (Apex) on your behalf as custodian.
Apex does not acquire a beneficial or proprietary interest in your securities or cash, or the income and rights attached to your securities.
Beneficial ownership means that you, the owner of the shares, receive the direct beneficial rights that come with those shares. That includes the right to sell them, transfer them, receive any dividend payments, as well as any associated tax, etc.
The shares purchased within your Superhero account are yours and cannot be accessed by others, including claims from any creditors.
Does Superhero lend securities or allow for short selling?
No, Superhero does not lend out the holdings of customers, and never has.
Securities lending is performed by some brokers where customers’ shares are lent out to other investors and firms for a fee. Securities lending can be used to allow these third parties to short companies.
How are my shares held by Superhero?
The Clearing House Electronic Subregister System (CHESS) is the computer system used by the Australian Securities Exchange (ASX) to manage the settlement of trades and record share holdings.
All trades in Australia, whether through ASX or Cboe (including those placed on Superhero) are cleared and settled via CHESS.
How does custody work? What is the difference?
A custodian is a regulated financial institution licensed to hold financial assets on your behalf for safekeeping. The responsibilities placed on a custodian are very high, and so are the regulations and requirements on those institutions. Unlike keeping your cash under the mattress, there are legal consequences for custodians that do not take the appropriate care when holding your financial assets.
Custodians must have a licence that requires them to hold significant amounts of regulatory capital before they can provide those services. The intention of holding regulatory capital is to protect investors by ensuring a custodian is shielded should it fall into financial stress.
At Superhero, we have appointed a sub-custodian to hold shares on behalf of our customers in Australia for safekeeping.
Your shares are actually held by FinClear, Superhero’s market, clearing and settlement participant. FinClear is used by many major brokers in Australia and holds all of the CHESS-sponsored shares for customers of brokers such as Stake, WeBull, Shaw and Partners and numerous other firms as at September 2023.
As a regulated entity, FinClear holds the legal title as a separate entity from Superhero (so there’s a clear separation between our operating business and your shares). This means that your shares are not in any way linked to Superhero’s financial viability because FinClear holds your shares.
Having a custodian ensures that the beneficial owner (that’s you) is the only one who can give instructions on what to do with your shares: be it buy more, sell some or transfer them to another broker. That is also true for creditors, who have no legal right to access your assets if Superhero were to no longer operate.
Are my shares secure with Superhero?
At Superhero, a custodian holds shares on behalf of our customers for safekeeping.
Your shares are held by FinClear, our market, clearing and settlement participant on behalf of Superhero. FinClear is used by many major brokers in Australia and holds all of the CHESS-sponsored shares for customers of various brokers.
As a regulated entity, FinClear holds the legal title as a separate entity from Superhero (so there’s a clear separation between our operating business and your shares).
Having a custodian ensures that the beneficial owner (that’s you) is the only one who can give instructions on what to do with your shares: be it buy more, sell some or transfer them to another broker. That is also true for creditors, who have no legal right to access your assets if Superhero were to no longer operate.
Am I covered by the National Guarantee Fund for Australian trading?
The National Guarantee Fund (NGF) is a compensation fund administered by the Securities Exchanges Guarantee Corporation (SEGC), that is available to meet certain valid claims which may arise from dealings with market participants of ASX and Cboe
Superhero, as a client of a market participant, may be able to make a claim to the SEGC in certain limited circumstances for failures of its market participant, including insolvency of the market participant.
Superhero is not a market participant and Superhero’s customers are not able to make a claim directly to the SEGC.
Importantly, caps apply to any NGF claims that may be made by Superhero that may impact the outcome and customer expectations regarding any claim.
You can find more information on caps and circumstances under which a claim by Superhero is permitted at Securities Exchanges Guarantee Corporation website in the ‘NGF Information Booklet’.
Can Superhero use my cash or shares?
No. It is against the law for Superhero to exercise any rights attached to the ownership of your cash or securities unless you specifically instruct us to do so. The cash and shares in your Superhero account are entirely under your control as the beneficial owner.
Your Australian securities are held in a CHESS-sponsored account in the name of FinClear Pty Ltd as sub-custodian of Superhero. Neither Superhero nor FinClear acquires any beneficial or proprietary interest in your securities or cash, or the income and rights attached to your securities and neither are able to exercise any rights attached to the ownership of your securities, including disposing of, or otherwise dealing in, your securities.
You alone are the beneficial owner of the cash and securities in your Superhero account.
Please refer to Superhero’s Terms and Conditions for further detail.
How does Superhero handle my order instruction and how is it directed into the market?
For AU shares: Any orders you place are directed into the market by our Market Participant (Finclear).
We pass your instructions on to our Market Participant. They execute your instructions according to their Best Execution Policy, the market Operating Rules and the ASIC Market Integrity Rules.
For US shares: Superhero has partnered with Apex Clearing Corporation LLC to manage its U.S. brokerage and execution services.
Apex Clearing is registered with the U.S. Securities and Exchange Commission (SEC), is a member of Financial Industry Regulatory Authority (FINRA) and is a participant in the Securities Investor Protection Corporation (SIPC). This protects every Superhero customer that holds U.S. securities for up to $500,000 (including $250,000 for claims for cash).