A custodian is a financial institution or entity responsible for the safekeeping, administration, and management of financial assets or securities on behalf of clients, such as individuals, institutional investors, or other entities.
Key Points:
- Safekeeping: Custodians securely hold physical and electronic financial assets to protect them from theft, loss, or damage.
- Transaction Processing: They facilitate the settlement and clearing of transactions, ensuring accurate and timely transfer of assets.
- Record Keeping: Custodians maintain detailed records of all transactions and holdings, providing clients with regular statements and reports.
- Corporate Actions Management: They handle corporate actions such as dividend payments, interest distributions, stock splits, and proxy voting.
- Regulatory Compliance: Custodians ensure that all transactions and activities comply with applicable laws and regulations, including AML (Anti-Money Laundering) and KYC (Know Your Customer) requirements.
- Risk Management: They implement robust risk management practices to safeguard client assets and comply with regulatory standards.
- Custodial Agreements: The relationship between the custodian and the client is governed by a custodial agreement that outlines the terms and conditions of the services provided.
Custodians play a critical role in the financial system by ensuring the security, efficiency, and regulatory compliance of asset management and transactions.
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