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 a custodian?
Their role is to hold assets separately to other assets, ensuring they are protected against theft or loss. Custodians perform a wide range of services such as legal ownership of scheme assets, recording transactions in identifiable accounts, reconciliation of bank accounts, execution of documents and reporting.
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.
