What is the difference between a nominee and a custodian

The Official Custodian for Charities performs a function specifically for charities which is similar to that performed by a custodian trustee, but now generally only in relation to charity land. Transfers of property into and out of a trust can also be facilitated by the use of a nominee to hold the title to the property. The nominee is the only person who has to participate in the formal transfer process, thereby increasing speed and lowering cost. Other administrative aspects of investment management may also be facilitated by the use of nominees.

Indeed, the current system for the transfer of stocks and shares in the UK resulting from transactions in the market has for many years necessitated the use of nominees in the process, and legislation has been passed to provide trustees generally with the necessary authority section 5, Stock Exchange Completion of Bargains Act ; article 33, Uncertificated Securities Regulations However, this legislation only authorises the use of nominees for the short period of time where this is an essential part of the modern stock transfer process.

Where the use of a nominee is merely convenient, trustees must still normally rely on powers in their trust document, or authorities from the Court or the Commission. The statutory rules relating to custodian trusteeship have largely prevented this particular form of nomineeship from being a practical response to the demands of the modern system of stock transfer.

For example, a custodian trustee would be prevented by the terms of the statutory relationship between itself and the managing trustees from making the sort of arrangements with the managing trustees which would be necessary to achieve the objective of speeding up the stock transfer process, and making it more convenient and economical.

The trust law rule referred to above required not only that the title to trust property should be held jointly by all of the trustees, but also that the evidence of that title - share and land certificates etc - should be in the possession of at least one of them. The rule did not generally insist on collective possession through deposit at, say, a bank to the order of the trustees jointly, although there is a statutory power to deposit trust documents of title at a bank or similar institution section 21 Trustee Act , and there is a statutory duty so to deposit bearer securities section 7 Trustee Act Charity trustees have a statutory power to deposit trust documents of title with the Commission, with its consent section of the Charities Act This rule, no less than the rule requiring the title to trust property to be held by the trustees jointly, inhibits the modern system of stock transfer, and the Act extends the existing power to deposit trust documents of title.

The existing duty to deposit bearer securities is preserved, with minor modifications. Tracing and following are both exercises in locating assets which are or may be taken to represent an asset belonging to the beneficiaries and to which they assert ownership. The processes of following and tracing are, however, distinct. Following is the process of following the same asset as it moves from hand to hand. Tracing is the process of identifying a new asset as the substitute for the old.

Where one asset is exchanged for another a claimant can elect whether to follow the original asset into the hands of the new owner, or to trace its value into the new asset in the hands of the same owner. In practice his choice is often dictated by the circumstances.

Where no asset can be identified as a substitute eg because the original asset was dissipated there can be no proprietary claim. And no proprietary claim can be asserted to an asset has passed into the hands of a bona fide purchaser for value without notice that the title of the vendor derived from a breach of trust.

To help us improve GOV. It will take only 2 minutes to fill in. Cookies on GOV. UK We use some essential cookies to make this website work. Accept additional cookies Reject additional cookies View cookies. Hide this message. Home Managing your charity Appointing nominees and custodians CC Contents 1.

What is this publication about? The Trustee Act 4. The relationship between the nominee to be selected and the charity 7. The independence of the nominee and custodian 9. Summary Annex A - The present law on the use by trustees of nominees and custodians Annex B - Tracing and following Print this page.

This publication: describes the provisions for the appointment of nominees and custodians brought in by the Trustee Act details the requirements with which trustees wishing to exercise these powers must comply In particular it contains in section 5 to 9 the statutory guidance given by the Charity Commission under s. The statutory duty of care referred to above also applies to this duty of review 4. The relationship between the nominee to be selected and the charity Under English law, the normal legal relationship between a nominee and the person on whose behalf he holds the property is that of trustee and beneficiary.

It is, therefore, important for trustees to ensure that the proposed arrangements with the selected nominee: do, in fact, make it clear that the shares or other property which the nominee is to hold on behalf of the charitable trust do, in fact, belong to the trust under English law trusts cannot be recognised on company share registers — section Companies Act will require the nominee to identify the property which he holds on behalf of the charitable trust, and to segregate it from any property which he holds on his own behalf — arrangements which give an individual charity joint beneficial ownership of an asset with other clients of the nominee may be acceptable The arrangements must be such as will enable the trustees, if necessary, to prove legally their beneficial sole, or joint, ownership of the assets held by the nominee on their behalf, for example if the nominee becomes insolvent.

The concept has gained popularity due to business owners willing to keep their information off of public records so that no one gets to know about their company ownership.

The real owners might also appoint a nominee director. Most of the time, the nominated director and shareholder are the same person. When a nomination is made appropriately, the real owners can sell their shares, receive all benefits, and get the right to vote during the general meetings. A nominee is an individual or entity that takes care of assets, securities, or properties on behalf of the actual owner. In some cases, it may have the right to claim the funds if the original owner dies, as in bank deposits.

A nominated party tends to act as a caretaker, trustee, or guardian of an asset or property, not the owner. They take possession of the said assets in different scenarios, such as for safekeeping shares in the stocks market, getting the legal title of shares of a company, or claiming the bank deposits. In contrast, a legal heir succeeds the property of a deceased person or becomes its owner under a will or succession law.

Investors use these accounts when trading in the stock market. This has been a guide to What is Nominee and its Meaning. Here we discuss nominees in the stock markets and shareholders along with the bank. You may also have a look at the following articles to learn more —.

Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Free Investment Banking Course. Login details for this Free course will be emailed to you. Forgot Password? Home » Personal Finance Resources » Nominee. Article by Wallstreetmojo Editorial Team. Nominee Meaning A nominee is an individual or entity that under financial terms gains access to assets and securities, including bank deposits, real property, and stocks, on behalf of the original owner.

Key Takeaways A nominee is a person or company that exercises exclusive rights over the assets, securities, and properties on behalf of the original owner. However, they tend to be the custodian only and not the owner, except the bank deposits. It acts as a trustee for mutual funds Mutual Funds A mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks.

In insolvency Insolvency Insolvency is when the company fails to fulfill its financial obligations like debt repayment or inability to pay off the current liabilities.

Such financial distress usually occurs when the entity runs into a loss or cannot generate sufficient cash flow. It gets better. A later clause cheerfully explains that because of the practices in certain overseas markets, my nominee investments may be recorded in the name of my broker or its custodian.

And if this happens then:. This clause suggests that my overseas securities could be used to settle the claims of creditors if my broker failed.

I asked my broker for clarification of this clause over two months ago. They have so far failed to supply a satisfactory answer. What I want to do is to raise the issue, and urge everyone to check the terms they have agreed with their broker.

If you are subject to similar conditions then please question your broker about whether such clauses apply to your own situation. The kids would never believe it, but it would confirm your ownership of the securities and you could use it to sell through any broker you liked.

Designated or sole nominee accounts — Your securities are registered in the name of the nominee but this time your assets are walled off in your own account. Such a luxury is rarely available to retail investors however.

Unlike the last two alternatives, paper certificates do protect you from fraud and negligence because no naughty nominee or rogue record-keeper can spirit away your holdings.

Sadly though, paper is susceptible to fire, theft, the vagaries of the postal service, and being mislaid in the same place where the orphaned socks go. Sadly transparent customer service is too often seen as a competitive disadvantage. Explanations of the nominee account system are generally buried in arcane small print or glossed over in brochure-speak accompanied by big ticks and smiley faces.

My best advice: Consider all the risks , diversify your holdings among a few brokers to reduce your risk, understand your right to compensation , and move on. Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. Please do check out some of the best articles or follow our posts via Facebook, Twitter, email or RSS. In the days when a 10MB database was something awesome, it was considered unthinkable that retail investors i.

The eurocrats have of course noticed all this and there is a new regulation being concocted called CSDR that as well as outlawing paper certificates will make the option of designated nominee accounts mandatory in all European CSD at least last time I read an article on it, it did…! The other related issue which I think you have raised before is to be aware how your broker holds cash — some hold it as a bank e.

I believe progress in getting this agreed is slow, and various deadlines have been proposed. There was a good article by one of the participating UK registrars in a recent ShareSoc newsletter.

Until then investors can always diversify their nominee accounts. We have the same broker and somewhat disappointing you have yet to receive a satisfactory answer. Thankfully navigating to their terms is quite easy. Unfortunately, as you point out, making sense of them is another game entirely. Hi Accumulator, Another informative piece.

We all have to leave planet earth at some point — and frankly it is an utter nightmare writing out to multiple registrars to notify them of a death and then complete forms to transfer ownership of each and every shareholding before sale can be made. As for shares listed on foreign exchanges well. Keep it simple for your sakes — and those you leave behind. Use collectives and other such wrappers and consider trust arrangements too which can be accessed without any need for probate.

I will probably open one more uk broker and leave it at that. Nominee accounts are essential for day traders and speculators. However I am a long term investor. So I have re-materialised some shares those I intend to hold for many years into certificated holdings.

The advantage is two-fold: first, I have full security and ownership without worry as to what a nominee is up to. It is well known that over-trading is costly to your wealth. To Chris B I like that argument.