What is a custodian?
A custodian bank is a financial institution that safeguards customers' securities to prevent theft or loss. In addition to providing asset protection, custodian banks offer services such as account and transaction management, financial transaction settlement, asset status tracking, and ensuring adherence to tax regulations.
For the benefit of its clients and customers, a custodian, often a bank or financial institution, is in charge of protecting tangible assets. Given their duty to protect valuable assets and securities, custodians frequently include established, sizable organizations like banks. Custodian banks are frequently used by investment advising firms to guarantee the security of the funds they manage on their client's behalf.
Additionally, a custodian may be chosen to take on the responsibility of maintaining and watching after the assets of a small child or an incapacitated adult, putting custody of those assets into their own hands. This guarantees that the assets are handled responsibly, appropriately, and with the person in question's best interests in mind.
Custodians are discrete from depositories. In 2020, the Securities and Exchange Board of India (SEBI) permitted non-banking custodians to handle gold exchange-traded funds (ETFs) and gold products. As a result, non-banking, banking, and other intermediaries that provide custodial services for gold ETFs began to appear. When handling client funds, financial advisers and investment advisors must, however, abide by the Securities and Exchange Commission's (SEC) custody rule.
For these custodial services, clients must pay banks and financial institutions fees, which are normally determined by the quantity of the investment deposited and the particular services offered. These charges, which are sometimes known as "safekeeping fees," can cost clients hundreds of dollars per year