Role of custodians, Financial Management

Role of Custodians

The Securities and Exchange Board of India on 5th May, 1996, through its notification No.S.O.344 (E) has issued the SEBI (Custodian of Securities) Regulations, 1996 (amended on January 2006). If any person, wishes to act as a custodian of securities on or after the regulations have come into vogue; he has to obtain a certificate to that effect from SEBI. Generally, custodian services are availed of in-house by the Mutual Funds. However, the institutions which are acting as professional custodians are Stock Holding Corporation of India (SHCI), Citibank, Industrial Investment Trust Ltd., (IITL); Hong Kong Bank, ABN Amro, ICICI Bank, Citi Bank, and Bank of India (BOI) Shareholdings Ltd.

Responsibilities to be discharged by the custodians on behalf of Mutual Funds include receipt and delivery of securities, holding of securities, collecting income, holding and processing cost, corporate actions, etc.

Functions of custodians widely cover safe keeping of securities, corporate actions and transfer agents. Salient features of each of these functions are given below:

Safe Custody

Safe keeping of securities covers a wider range of services rendered to the customer viz., scheme-wise segregation of assets and regular checking and verification of securities, registration of securities for proper verification, regular reconciliation of assets to accounting records.

Trade Settlement

Trade transactions take place at the instance of fund managers, but settlements are done at the instance of the custodian which is responsible for the timely receipt and delivery of cash and securities i.e., securities will be delivered on receipt of cash and payment will be made only on receipt of securities. Any discrepancies arising out of the trade settlements are resolved at the end by the custodian.

Corporate Action

Custodian also assists in taking corporate actions viz., dividend declarations, exercise the rights of equity holders, collection of dividends, rights, etc.

Transfer Agents

Custodians perform various important functions, in addition to attending to shareholders transactional activities viz., to issue, transfer, exchange, redeem, maintain detailed records of transactions, receipt of dividends, reimbursement of dividend and purchase of securities, etc. They also maintain records of confirmations of transactions, cheque registers, certificates, files, commission reports, tax reporting, etc.

To sum up, the consolidated activities of sponsors, trustees, AMC and custodians form the basis of the organization and management of the mutual fund.

 

Posted Date: 9/11/2012 1:20:24 AM | Location : United States







Related Discussions:- Role of custodians, Assignment Help, Ask Question on Role of custodians, Get Answer, Expert's Help, Role of custodians Discussions

Write discussion on Role of custodians
Your posts are moderated
Related Questions
Work out and submit the comprehensive problem below. Halstrom Corporation purchased a piece of equipment three years ago for $230,000. It has an asset depreciation

As an investor, what factors would you consider before investing in the emerging stock market of a developing country? Answer:  An investor in emerging market stocks requirements

Two years ago, Randburg Ltd needed to accumulate a total of R250000 by the end of 5 years to acquire new imported machinery. To do so Randburg Ltd makes quarterly-annual deposits i

Investors, who do not believe in Efficient Market Hypothesis (EMH), adopt active management strategies. Such investors incur more search costs (with regard to tim

Does is make any sense to calculate betas against local indexes when a company has a great part of its operations outside this local market? Both the betas calculated against l

Case Study - Credit-Linked Notes Credit linked notes are assets issued by financial institutions which have exposure to the credit risk of a reference Issuer . These notes pay

in 2002, jackson incorporated had gross sales of $4269200. for 2002, management estimated that returns and allowances would be 5 percent of gross sales. what did jackson report as

Explain how a firm determines the optimal level of current assets. The best possible level of working capital is determined by finding the amount that balances the need for liq

Trading Mechanism Of Future: Flow of the Order Any person who wants to trade in futures has to contact a Futures Commission Merchant (FCM) or a broker. First, let us look

Question 1: In the financial system, the capital markets consist of the Bond and the Equities Market. Develop this statement. Question 2: (a) Discuss why banking regula