Business, Legal & Accounting Glossary
A Custodian is responsible for holding securities on behalf of clients in order to reduce the risk of having the assets lost or stolen. Since the assets are still in the clients name, assets are not fungible or can not be used by the custodian for his/her own ends. The custody agent would be performing investment discretion in a fiduciary capacity.
one having charge of buildings or grounds or animals
A custodian is a bank or other institution that holds securities on behalf of investors. The tasks performed by a custodian include:
Collectively, these services are called custody.
Custodians are typically used by institutional investors who do not wish to leave securities on deposit with their broker-dealers or investment managers. By separating duties, use of custodians reduces the risk of fraud. The custodian independently ensures that the investor has unencumbered ownership of the securities other agents represent to have purchased on their behalf.
If an investor holds foreign securities, their custodian will contract with custodians in foreign countries to provide local custody services. These foreign custodians are called sub-custodians.
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This glossary post was last updated: 26th April, 2020 | 6 Views.