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Simple English definitions for legal terms
custodian bank
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A quick definition of custodian bank:
A custodian bank is a type of bank that is responsible for holding and safeguarding assets, such as stocks, bonds, and other securities, on behalf of its clients. Think of it like a safe deposit box for your valuable items. The custodian bank is supervised and examined by a state or federal authority to ensure that it is operating in a safe and secure manner.
A more thorough explanation:
Definition: A custodian bank is a financial institution that acts as a custodian for a clearing corporation and is supervised and examined by a state or federal authority.
Example: For example, if you invest in stocks or bonds, your custodian bank will hold those securities on your behalf and ensure that they are safe and secure. The custodian bank will also handle any transactions related to those securities, such as buying or selling them.
Explanation: The example illustrates how a custodian bank acts as a safekeeper for securities and handles transactions related to those securities. The custodian bank is responsible for ensuring that the securities are safe and secure and that any transactions related to them are handled properly. This is an important role in the financial industry, as it helps to ensure that investors' assets are protected and that transactions are conducted in a secure and efficient manner.