Explaining Custodians

There are two types of custodians on the system.

  1. Owner Custodians
  2. Asset Holder Custodians
Owner Custodians

The Owner Custodian owns the money received from the investor, with which to invest, or money received following the withdrawal of an investment I.e. the cash used with which to buy the units, or cash received following the sales of units is owned by the Owner Custodian. See Bank Account on a Custodian to see how this is setup.

Asset Holder Custodian

The Asset Holder Custodian owns the units in the market. The Dealer is buying or selling units on behalf of the Asset Holder Custodian.

Choosing an Owner and Asset Holder Custodian

The expectation is that the entity who owns the money is the same entity who owns the units. However this isn’t always the case as often a Nominee account is used to buy/sell units in bulk. In this case, the Owner Custodian who owns the money will have an agreement in place with the Asset Holder Custodian who owns the units on behalf of the Owner Custodian.

Changing an Owner and/or Asset Holder Custodian

For the reasons mentioned above, changing the Owner or Asset Holder Custodian on a product should be considered carefully. Considerations include the following:

  1. If a new Asset Holder Custodian will be used, and the investments are managed on a LISP platform, it means that the bulk account owner of the units is changing, which means share transfers will be required in the market, since the ultimate owner of the bulked units is changing
  2. There may be a contract in place between the investor and the investment manager stipulating who the ultimate owner of the units is, and by changing the Asset Holder Custodian, this may need to be changed.
  3. Investor Instrument Accounts’ (which is a unique combination of Instrument, Dealer and Custodian for a client account) unit balances and historical transactions will need to be transferred to a new Instrument Account or balances moved to a new instrument account with no historical view on the new instrument account, since the Custodian has changed.

Last Updated on 1 year ago by Adrienne Dill