What Is Global Custody?
Global custody refers to the practice, primarily performed by banks, of safeguarding securities on behalf of clients. This service encompasses a range of activities, including valuation and reporting, settlement of trades, registration of ownership under specialized nominee companies, collection of domestic and foreign income, and tax accounting—covering multiple markets and securities across different countries.
Examples of Global Custody:
- Multi-Market Securities Management: A global custodian bank manages a client’s securities portfolio spread across various global exchanges. It handles the settlement of trades, ensures timely collection of dividends, and provides comprehensive reporting for tax purposes.
- Nominee Services: A global custodian uses a nominee company to hold the securities in its name, simplifying the registration process and safeguarding the client’s anonymity and security.
- Income Collection: Handling the collection of income from both domestic and international sources on behalf of the client efficiently, ensuring the timely remittance of dividends, interest, and other income forms.
Frequently Asked Questions (FAQs)
Q1: What are the primary benefits of using global custody services? A1: The primary benefits include enhanced security of assets, streamlined trade settlements, comprehensive reporting, global tax accounting, reduced administrative burden, and simplified ownership registration via nominee companies.
Q2: How does a global custodian ensure the safety of my securities? A2: Global custodians employ advanced security measures, comply with strict regulatory standards, and utilize nominee companies to legally hold the securities, thereby reducing risk and enhancing safety.
Q3: Can global custodians handle both domestic and international securities? A3: Yes, global custodians are equipped to manage both domestic and international securities, including the collection of income and regulatory reporting for various markets.
Q4: Are global custodians responsible for the tax reporting of my investments? A4: Yes, one of the key services offered by global custodians includes comprehensive tax accounting and reporting to assist clients in meeting their local tax obligations.
Q5: How does using a nominee company benefit me as an investor? A5: Using a nominee company provides anonymity, simplifies administrative procedures, and centralizes the management of security registrations, which can protect investors’ privacy and reduce transaction complexities.
Related Terms
- Custodian Bank: A financial institution responsible for safeguarding a firm’s or individual’s financial assets.
- Nominee Company: A company formed to hold securities and assets anonymously on behalf of one or more beneficial owners.
- Trade Settlement: The process of transferring securities to complete a trade between buyers and sellers.
- Portfolio Valuation: Assessing the market value of securities in a client’s portfolio for reporting and strategic planning.
- Tax Accounting: The process of preparing tax returns and ensuring compliance with financial and tax regulations for investments.
Online References
Suggested Books for Further Studies
- “Global Custody and Settlement” by David Loader
- “Custodianship in the Securities Business” by Steven Mark Levy
- “Understanding Global Custody and Clearing Operations” by Kevin R. Mirabile
Accounting Basics: “Global Custody” Fundamentals Quiz
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