Safekeeping

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Safekeeping

The act of a brokerage holding a client's securities or other assets on his/her behalf. This reduces the risk of the client losing his/her assets or having them stolen. They are also available to the brokerage to sell at the client's demand. Like a bank, safekeeping provides an investor a place to store assets with little risk. Unlike a bank, brokerages are not allowed to use the items in safekeeping for their own ends. Assets in safekeeping are not fungible for the brokerage because they remain in the client's name; for this reason, brokerages normally require a fee for safekeeping services. See also: Street name safekeeping.

safekeeping

The keeping of assets, including securities, by a financial institution.

Safekeeping.

Safekeeping occurs when a broker-dealer holds securities that are registered in a client's name for the client.

The advantage from the client's perspective is that the securities are safe and the broker-dealer has them available to sell at the client's instruction.

The disadvantage from the broker-dealer's perspective is that securities held in a client's name are not fully negotiable or fungible, so they can't be used to settle trades, for example. Thus, it's a service for which many firms charge a fee.

Instead of being registered in their own names, clients' securities may be registered in the broker-dealer's name or in the name of a depository. That's known as being registered in street name or nominee name.

With this type of registration, the client's ownership rights are fully protected but the stock is fungible. The broker-dealer may use a limited portion of the holding to settle trades or for other purposes.

References in periodicals archive ?
The new category is a subset of safeguarding of assets controls as defined in the COSO report.
The new definition of internal control over safeguarding of assets against unauthorized acquisition, use or disposition is depicted by a narrow vertical slab incorporating a small portion of each of the operations and financial reporting categories.
The COSO report deals with controls over the safeguarding of assets, but it defines such controls, and properly so, as operations controls.
The act requires the system to meet specified criteria on accountability for and safeguarding of assets and the authorization and recording of transactions.

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