What is the difference between custodian and depository

In particular, the person or entity must be considered a qualified custodian. That limits the field to banks, registered brokers, registered dealers, and certain other individuals or entities. Notices must be supplied to customers when certain activities are conducted on their behalf. Regular account statements must be supplied to the customers.

A custodian may be appointed to manage the assets of a minor child. In this case, the custodian could make active investing decisions. If an account beneficiary is a minor, a custodian is often required. In such cases, the custodian may be a responsible individual rather than an institution. The custodian has the authority to make investment decisions regarding the assets in the account, but the funds are ultimately intended for use only by the named beneficiary. Each account can have only one beneficiary, the minor account holder, and one custodian, a designated adult representative.

The custodian remains in place until the beneficiary reaches adulthood. Other people can contribute to a minor's account, but they have no authority over how the funds are managed once they are deposited. A custodian financial institution holds customers' securities for safekeeping to prevent them from being stolen or lost.

They may hold stocks or other assets in electronic or physical form. The SEC requires that they must notify customers when certain activities are conducted on their behalf in addition to sending regular account statements. They may also have the right to assert possession of the assets if required, often in conjunction with a power of attorney. The Clearing House. Accessed July 28, Securities and Exchange Commission.

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The main difference is that a depository has larger oversight responsibilities for the assets held in comparison to the custodian. In addition to having custody over the assets, a depository also has control and legal ownership over the assets. Another major difference is that the depository must maintain, sell, issue, repurchase, and conduct other activities involving the assets and securities under the rules, laws and other applicable financial, legal or regulatory guidelines.

In comparison, a custodian conducts these activities on the instructions of their customers. Depositories can delegate custodian tasks to third parties, and if any financial instruments held are lost, the depository is completely liable and must assume full responsibility. However, the custodian is only responsible for any general losses or negligence, and not be responsible for any investment losses.

The depository conducts all the services and activities of a custodian, but goes a step ahead in terms of control of assets and liability.

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