In addition, there are also various laws and rules governing the relationship between a stockbroking company and its clients, which is that of a principal (client) and agent (stockbroking company). These are the general law of principal and agent, the provisions in the SIA and the KLSE Rules. Essentially, agents owe a fiduciary duty to their principals who rely on them, placing trust and good faith in their agents.

Among other duties to their clients, stockbroking companies are required to:

• Carry out their client’s lawful instructions. If a stockbroking company fails to obey a client’s instructions, it will not be entitled to the commission and may lose the right to be indemnified against liabilities incurred. Furthermore, it may be held liable to the client for damages.
  
• Not compete with client in that they must act as agents for the client. If a conflict of interest arises, they are obliged to fully disclose all material circumstances known to the stockbroking company that might influence the decision of the client.
  
• Exercise due care, skill and diligence when carrying out its duties to the client.
  
• Clearly separate a client’s assets from that of the stockbroking company. The stockbroking company must also keep accounting records, which clearly identify client assets.
  
• Stockbroking companies must have an adequate system for the supervision of their representatives to ensure investor interests are protected.
  
• Establish and implement written procedures to handle complaints from clients, designate and make known to the public the name of a complaints officer.

In addition to the above, all remisiers or dealer’s representatives are also bound by a standard remisier’s agreement between them and the stockbroking company. As remisiers are liable for any losses incurred by the stockbroking company arising from trades dealt through them, they must take into account their client’s investment objectives, knowledge and experience in dealing in securities, as well as the particular needs of their clients when serving the client.