Custodial Participant

A custodial participant is a financial institution or entity that holds and safeguards financial assets on behalf of investors. Custodians provide services such as safekeeping securities, managing account settlements, collecting dividends or interest, and ensuring regulatory compliance. Custodial participants play a vital role in the financial system by protecting investors’ assets and facilitating smooth transaction processing.

Example

A pension fund may use a custodial participant to hold its portfolio of stocks, bonds, and other securities, ensuring they are securely stored and dividends are properly collected.