Mutual Fund Custodian ia a qualified financial institution that maintains physical custody of a mutual fund’s cash and securities. Custodians are usually banks, trust companies, or Exchange member firms.
Applying "Mutual Fund Custodian" to Securities Exams:
According to the Investment Company Act of 1940 mutual funds are required to be diversified i.e.: at least 75% of the fund’s assets must be invested in securities. That means the mutual fund invests in a large number of different securities. Those securities are held in safekeeping by a custodian, aka: a custodian bank, who also provides bookkeeping services for the fund. The custodian charges a fee for these services, which makes the custodian an expense to the fund, and therefore part of the fund’s expense ratio. It is important to remember that the mutual fund custodian does not hold investor shares of the mutual funds and does not hold investor assets. The custodian only holds the mutual fund portfolio. Series 6, Series 7 series 24 and series 26 test takers are likely to see questions relating to a mutual fund custodian on your exam. Be sure you pass your exam with our greenlight money back pass guarantee.