Your Money: Will Crest be fair for all?

CREST, the proposed new system of share dealing, will create a two-tier market with distinct tracks for the occasional dabbler and the dedicated follower of the Footsie.

The dabblers will probably want to hold on to their share certificates. They will make the odd foray into the high street to put through a 'buy' or 'sell' order, and keep certificates at home in an ordered stack.

They will have to hand-deliver a certificate to the postal-dealing service or bank before the deal can be struck, so there will be no opportunity to take advantage of hour- by-hour price movements.

The first change, due in the middle of next year, will mean the end of the three-week Stock Exchange accounting period. Instead, rolling settlement will take place, initially 10 working days after the deal, and then, about six months later, five days.

This will be the crunch. The present banking system - never mind the postal system - cannot deliver cash into the broker's account before it has to be paid out to the seller. So regular clients will have to set up lines of credit or keep cash for trading with the broker.

And the brokers in turn will have to offer decent rates of return and an easy way of spending the cash in the pool.

One broker, Albert E Sharp, based in Birmingham, has got ahead of the field through a link with Bank of Scotland that gives clients a cheque book and card.

Clients can specify that they want a managed service and, for instance, need pounds x three times a year for school fees. The broker will then ensure enough cash is available at the right times so the client can write the cheques.

This trading class of investor will almost certainly be pushed towards holding shares in a nominee account, and will join the great paperless share game, which is the point of the whole change.

Some private client brokers believe that unless investors are given a direct line to the companies in which they have shareholdings - so they can attend annual meetings, pick up the perks and read the annual reports - the resistance to giving up traditional paper share certificates may be too great.

Active clients will not have to opt for a managed service, and will still be able to take investment decisions themselves.

The final details of Crest have not been worked out. But there are several worries for private clients in all this: first, that those who want to hold on to paper will be frozen out of the system as brokers get hooked on electronics and refuse to deal in paper; second, that the same effect will be achieved by pricing the occasional dealer out of the market; and finally that nominee names will disenfranchise investors from the companies they 'own'.

On the whole, I'm prepared to be optimistic about these concerns.

It seems that there are enough players in the market for diversity to encourage different ways of handling the public's dealing.

But there is a real danger that paper settlement will be the poor relation, with prices in the market adjusted to make those investors determined to hang on to their paper pay a high price.

THE COURT cases over 'phantom' withdrawals from bank accounts via cash machines will not heighten confidence over dematerialised share trading.

But it was the banks' attitude that nothing could ever go awry with their computers, cash machines or plastic cards that caused the credibility gap.

Of course there are going to be cases of people 'trying it on', and others where a member of the family is the culprit. But there is not always an easy explanation.

The banks are afraid that if they admit that it is just possible for rogue mistakes to occur, they will be buried in an avalanche of claims.

Instead, the impression has been given that they are invulnerable to argument.

Before the paperless share dealing age gets under way, it is essential that there is an established route to follow if disputes arise over the ownership of shares, and that will have to be seen to be impartial and fair.

AMERICAN Express is planning to offer three different interest rates on its Optima credit cards from next January.

It wants to charge the troublesome non-payers more than the reliable customers.

Once again, class divisions will be introduced where none existed before. Will there be any way of appealing, and how will it look on credit checks?

The development has worrying implications.