Role of custodians, Financial Management

Assignment Help:

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.

 


Related Discussions:- Role of custodians

Working capital as a percentage of net sales, Q. Working Capital as a Perce...

Q. Working Capital as a Percentage of Net Sales? This approach to estimate the working capital requirement is based on the fact that the working capital for any firm is directl

Ledge ac count, Ask question #Minimum 100 words accepted

Ask question #Minimum 100 words accepted

Strategic investment and decision-making, Carr, C., Kolehmainen, K. and Mit...

Carr, C., Kolehmainen, K. and Mitchell, F. (2010) ‘Strategic investment decision-making practices: a contextual approach', Management Accounting Research, 21, 167-84. (a) What a

Calculate the future value of annuity, 1.  An investor is thinking of inves...

1.  An investor is thinking of investing in a recurring deposit scheme that offers an interest rate of 12% per annum. The investment that he is planning is for the higher education

Different types of cash flow to bondholder of coupon bonds, What are the di...

What are the different types of cash flow to the bondholder of coupon bonds? Coupon bonds deliver two different kinds of cash flow to the bondholder are as follows: a. Face

What are the motives of holding cash, Q. What are the Motives of Holding Ca...

Q. What are the Motives of Holding Cash? Motives of Holding Cash: - In every business assets are kept for the reason that they generate profit. But cash is an asset which doesn

Different cost of capital with changed proportions, Different Cost of Capit...

Different Cost of Capital with Changed Proportions: It is quite possible that the specific costs of capital of different sources may be affected by the amount of funds' raised and

Interest rate risk, Bonds are usually recognized by yields, which cha...

Bonds are usually recognized by yields, which change from time to time owing to many market forces. There exists an inverse relationship between the bond price and the

Cost of capital, ABC Ltd. Produces electronic components with a selling pri...

ABC Ltd. Produces electronic components with a selling price per of Rs.100. Fixed cost amount to Rs.2,00,000/- 5000 units are produced and sold each year. Annual profits amount to

Perform appropriate ratio analyses on the balance sheet, Perform appropriat...

Perform appropriate ratio analyses on the balance sheet and income statements of your company using techniques discussed in chapter 2 of your textbook. Compare your company to a c

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd