What is a CREST personal account?

CREST is the central securities depository and settlement system for the UK and Ireland. It is responsible for recording the existence of demateralised shares (ie those that are recorded solely in electronic form – as most are these days – and do not have paper certificates) and transferring ownership between buyers and sellers when stocks are traded though a stock broker.

Most UK shareholders have their stocks held ‘in nominee’, which means that their holdings are pooled together with holdings from other clients of their stock broker. The legal owner of these shares is recorded through CREST as being their stock broker’s nominee company (which is a non-trading entity set up to hold client assets). The shareholder is the beneficial owner – meaning that they have rights over the shares – but they do not appear on the shareholders register.

However, it is possible for individuals to have their own CREST personal member account and have shares recorded in their name on the register. For this to happen, they need to be sponsored for CREST membership by a stock broker.

Individual CREST membership is not a particularly complex or costly process, but for maximum efficiency most stock brokers prefer to have all their clients hold shares in nominee, so relatively few firms offer CREST sponsorship and even fewer actively promote it. For a list of brokers that do, see the CREST personal account comparison table.

Advantages of a CREST personal account

The clear advantages of a CREST account is that you are on the register of shareholders. As a result, you will receive annual reports, the right to vote on questions put to shareholders and attend annual general meetings and extraordinary general meetings, direct notification of corporate actions, direct credit of dividends to whichever bank account you choose and the right to any shareholder perks the firm offers. Owners of shares held in nominee depend on their stock broker to pass these rights on and not all brokers pass on all rights.

Whether CREST gives you greater protection in the event your stock broker goes bust is debatable. Shares held in nominee are still your property and are ring-fenced from the stock broker’s creditors. The only situation in which this should fail is if there has been fraud or negligence and your shares are missing from the account. In that case, you should be covered by the Financial Services Compensation Scheme (FSCS), up to a limit of £50,000.

Holdings in CREST accounts are still accessible by your stock broker – otherwise they wouldn’t be able to execute trades for you – so a rogue employee or desperate management could still steal assets from individual CREST accounts. As a result, it is not clear they provide any greater protection against fraud.

However, when stock brokers collapse, it often turns out that record-keeping is incomplete and sorting which clients own which assets can be difficult and take time. It seems likely that clients with CREST accounts would be at an advantage here, since – barring fraud – their holdings should be recorded in their name and their sponsored CREST account could simply be transferred to another stock broker.

ISAs and foreign stocks in CREST

Personal CREST membership cannot be used for Individual Savings Accounts (ISAs), as the ISA rules insist that nominee accounts are used for this. Self-Invested Personal Pensions (SIPPs) may be possible through some providers if they will allow you to act as trustee of your own SIPP, but this option will probably be confined to more expensive high-end SIPP offerings.

A significant number of foreign stocks from North America and Europe can be settled through the CREST systems as CREST Depository Interests (CDIs). Owning CDIs is slightly different to owning UK & Irish stocks through CREST; the foreign stocks are held by the CREST system through its own membership of the relevant overseas central securities depository and you then hold an instrument that can be settled through CREST which gives you beneficial rights over them. Your name does not appear on the register of shareholders of the foreign company.

Not all brokers that offer CREST membership will offer trading in international stocks. Some that do may choose to deal and settle directly abroad rather by using CDIs.