2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
A depository is a banking unit that acts as a depository for securities. Also, sometimes a depositary is understood as cells in a bank in which gold, money, jewelry and other valuables are stored. But in this article we will focus on the first definition, that is, about a participant in the securities market.
Depository - what is it for?
Depositary banking division is responsible for the accounting and storage of securities such as shares. It also helps control the transfer of ownership from one owner to another. That is, if brokers and dealers are engaged in the transactions themselves, then the depository division records that the transaction took place and the ownership of these securities passed to the new owner.
How does it work?
In order to become a depositor, that is, the owner of a custody account, you need to conclude a depository agreement with a financial institution. A depo account is all entries in the aggregate relating to shares, bonds and other securities of a specific depositor. They can be either a private individual or a legal entity. This account displays absolutely all transactions that have ever been made withsecurities.
When a person purchases shares, a separate account is opened in the depositary in his name, and all his securities will be listed in it. So they will be accountable and protected. Thus, a depository is a repository of such records, which contains all securities belonging to a person or legal entity. They can be both in physical (paper) form and in electronic form.
What can a securities depository do?
The most basic operations that can be performed by a client who has opened a depo account, in addition to the storage and accounting of certificates, relate to their purchase, sale and donation.
In addition, the client has the opportunity to transfer securities to other depositories or registries, as well as receive reports on their savings and dividends upon request. Securities can be left as collateral for loans. Then the depository can both impose and remove encumbrances on securities.
The depositary is also the assistant who credits the owner of securities with his income on them, that is, dividends. He is also responsible for the safety of entrusted securities, helps protect against theft and fraudsters.
Services provided by the depository
They are divided into basic and accompanying. The former include the storage of the certificates themselves, financial calculations, the provision of information on joint-stock companies, the re-registration of property rights, the preparation of reports and other documents.
Support services are as follows: research andmarket analysis, asset lending, reporting on investment activities, etc.
Types of depositories
In the Russian Federation, about half a million organizations are licensed to be professional participants in the securities market, which is growing more and more actively. Based on the total value of the securities held in the depository, ratings of the largest and most reliable are compiled annually. The highest degree of reliability is marked with three letters "AAA".
In addition, depositories are divided into different types according to their purpose.
The settlement depositary is engaged in settlements on completed transactions in the securities market.
Custodial provides services only directly to asset holders. It is already divided into a specialized depository and a non-specialized one. The first deals with the accounting and control of mutual funds, as well as private pension funds of various companies. The second, in addition to performing its standard and basic functions, may be an intermediary in the management of securities entrusted to this depository.
There is a central depository. He controls the entire securities market in the country or any particular region, makes all financial calculations. There are such depositories both abroad and in Russia. According to various criteria, such status is assigned only to the only legal entity in the country or region. In Russia, the central depository has appeared recently in comparison with the West and is located in Moscow. Since 2012, it has been CJSCNational Settlement Depository. He is engaged in conducting operations on securities holders' depo accounts when these participants implement transactions through various organizers of trading on the securities market, that is, when trading on the stock exchange.
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