subcustodians

Subcustodians are financial institutions that hold and administer securities and other assets on behalf of clients in markets where the primary custodian does not have a local presence. They operate within a custody network established by a global or master custodian, which appoints subcustodians under contracts that define safekeeping, settlement, and asset-servicing obligations. Assets may be held in segregation to protect client ownership and to comply with local legal regimes.

Role and services: Subcustodians provide safekeeping of securities, settlement of trades in local market infrastructures, and processing of corporate actions, income collection, and tax reclaim support. They may also assist with proxy voting, cash management, and foreign exchange settlement, as well as lending support and collateral movements as part of broader securities financing activities. The master custodian remains ultimately responsible to the client for the safekeeping of assets and for ensuring that service levels are met.

Contractual and oversight framework: The subcustodian operates under a subcustodian agreement with the master custodian and is subject to due diligence, monitoring, and regulatory compliance requirements of its jurisdiction. Clients typically rely on the master custodian for risk management and reporting, with the subcustodian providing operational execution in the local market.

Risks and regulation: Subcustodians face local regulatory risk, operational risk, and settlement risk. Securities are typically guarded and segregated from the custodian’s own assets and protected by local insolvency regimes where possible. Effective risk controls, audit rights, and incident reporting are standard components of the relationship. Overall, subcustodians enable global asset owners to access and service investments across diverse markets while maintaining centralized oversight.