Safekeeping is the holding and administration of securities on behalf of others, so that an investor's assets are recorded, protected and kept separate from the custodian's own. Under the UCITS Directive and the Alternative Investment Fund Managers Directive (AIFMD) the depositary must hold financial instruments in custody and verify ownership of other assets, with strict liability for losses.
CustodianA custodian is a financial institution, usually a bank, that holds securities and cash on behalf of clients, settles their trades and services the assets through corporate actions, income collection, tax relief and reporting. A global custodian covers many markets through its own branches or a network of sub-custodians.
Depositary (funds)A depositary is the independent institution, usually a bank, appointed for a UCITS or an alternative investment fund to safekeep its assets, monitor its cash flows and oversee that the manager complies with the rules on subscriptions, valuation and investment limits. It is liable for the loss of financial instruments held in custody.
Omnibus accountAn omnibus account is a securities account in which an intermediary holds the securities of several clients together, keeping the split by client in its own records. The Central Securities Depositories Regulation (CSDR) requires CSDs and their participants to offer clients a choice between omnibus client segregation and individual client segregation, with disclosure of costs and protection levels.
ReconciliationReconciliation is the regular comparison of two sets of records that should agree, such as a firm's securities positions and the custodian's statement, cash ledgers and bank statements, or trade details with a counterparty, followed by investigation of differences (breaks). It is a key control in operations and finance.
UCITS (Undertakings for collective investment in transferable securities)A UCITS is an open-ended investment fund authorised under Directive 2009/65/EC that invests in liquid financial assets under diversification and leverage limits. A UCITS authorised in one member state can be marketed to retail investors across the EU with a passport, and it must appoint a depositary.
AIFMD (Alternative Investment Fund Managers Directive)The Alternative Investment Fund Managers Directive (AIFMD), Directive 2011/61/EU, regulates managers of funds that are not UCITS, such as hedge, private equity, real estate and infrastructure funds. It sets authorisation, capital, depositary, reporting and marketing rules; Directive (EU) 2024/927 (AIFMD II) adds loan origination and liquidity rules.