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Sunday 15 April 2012

Q1. Discuss the role of a custodian of shares.


Custodial services refer to the safeguarding of securities of a client. The activities relating to custodial services involve collecting the rights benefiting the client in respect to securities, maintaining the securities’ account of the client, informing the clients about the actions taken or to be taken, and maintaining records of the services.
Custodian of services is a person who proposes or carries on the business of providing custodial services. The custodian provides the services to a client. To receive custodial services, the client enters into an agreement with the custodian of securities. The custodian of securities must be registered with the SEBI. The person proposing to carry on business as custodian of securities after the commencement of the SEBI regulations has to send an application to the Board to grant a certificate. The applicant has to provide the necessary information to the Board to receive the certificate of registration. The application without complete information is rejected. However, before rejecting any application, the Board gives an opportunity to the applicant to remove the objection within a specified time.
Custodial services is a new method of services provided to Foreign Institutional Investors (FIIs) and Mutual Funds (MFs) to protect their assets such as security certificates and documents of ownership. Every custodian should have adequate facilities, sufficient capital and financial strength to manage the custodial services.

The SEBI regulations prescribe the roles and responsibilities of the custodians. According to the SEBI the roles and responsibilities of the custodians are to:
· Administrate and protect the assets of the clients.
· Open a separate custody account and deposit account in the name of each client.
· Record assets.
· Conduct registration of securities.

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