A custodian is a bank that holds financial assets for safekeeping to minimize the risk of theft or loss. Investment advisors are required to arrange for a custodian for assets they manage for their clients. In modern times, these assets may be stored in physical or electronic form.
Why do we need custodian bank?
“A custodian or custodian bank is a financial institution that holds customers' securities for safekeeping to prevent them from being stolen or lost. The custodian may hold stocks or other assets in electronic or physical form.”
What are the functions of a custodian?
The role of a custodian in such a case would be to:
- hold in safekeeping assets/securities such as stocks, bonds, commodities such as precious metals and currency (cash), domestic and foreign.
- arrange settlement of any purchases and sales and deliveries in/out of such securities and currency.
