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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