What Are the Legal Responsibilities of a “Qualified Custodian”?
A qualified custodian is a financial institution, such as a bank or trust company, that is legally permitted to hold client assets. Under regulations like the SEC's Custody Rule, they have specific responsibilities designed to protect investors.
These include maintaining assets in segregated accounts, separate from the custodian's own assets, to prevent commingling. They must also undergo regular audits and provide account statements directly to clients.
The goal is to ensure that client funds are secure, properly accounted for, and protected in the event of the custodian's failure.
