Investment - ​Custodians and Depositories
Custodians are primarily banks and brokerage businesses that hold money and securities for safekeeping on behalf of their clients. They play a vital role in lowering the danger of securities being lost or stolen. Security ownership data were historically widely stored as physical paper certificates in secure vaults.  

Now, securities are almost completely stored in electronic book-entry form as secure computer records, which considerably decreases the costs of clearing and settling trades. Custodians may offer various services, including trade settlement and the collection of interest and dividends.
Depositories operate not only as custodians but also as monitors. They are generally regulated, and their responsibilities are as follows: 

Prevent the loss of securities and payments through fraud, insufficient oversight, or natural disaster. 
Ensure securities cannot be pledged more than once by the same borrower as collateral for loans. 
Ensure securities that are reported to be purchased are actually purchased.  

Having trusted third-party custodians and depositories retain all assets managed by an investment manager helps prevent investment fraud, such as Ponzi schemes, which use money supplied by new investors to pay supposed returns to existing investors rather than to purchase additional securities.


Most individual investors and many smaller institutional investors hold stocks in brokerage accounts that provide them with custodial services. Their brokers, in turn, retain the securities with custodians and depositories for protection.