Business, Legal & Accounting Glossary

Definition: Custodian

Quick Summary of Custodian

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.

What is the dictionary definition of Custodian?

Dictionary Definition

one having charge of buildings or grounds or animals

Full Definition of Custodian

A custodian is a bank or other institution that holds securities on behalf of investors. The tasks performed by a custodian include:

  • safekeeping of securities
  • delivering or accepting traded securities
  • collecting principal, interest, or dividend payments on held securities

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.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Custodian. Payroll & Accounting Heaven Ltd. September 27, 2021
Chicago Manual of Style (CMS):
Custodian. Payroll & Accounting Heaven Ltd. (accessed: September 27, 2021).
American Psychological Association (APA):
Custodian. Retrieved September 27, 2021, from website:

Definition Sources

Definitions for Custodian are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th April, 2020 | 6 Views.