Safekeeping

Exploring Safekeeping: What It Means and How It Works

Safekeeping, often referred to as safe keep, is a crucial concept in finance, involving the secure storage of assets or valuable items in a protected environment. This article delves into the intricacies of safekeeping, covering its definition, methods, and special considerations.

Understanding Safekeeping

Safekeeping entails storing assets or items of value in a secure area, such as with a custodian or financial institution. These assets may include financial instruments like stocks or bonds, physical valuables like jewelry or rare paintings, or important documents. When individuals opt for safekeeping, they can choose self-directed methods or utilize the services of banks or brokerage firms.

Key Facts about Safekeeping:

• Safekeeping involves the storage of assets or valuable items in a secure area, often with a custodian or financial institution.
• Assets placed in safekeeping are typically accompanied by a safekeeping certificate.
• Custodians primarily hold securities and valuables for investors, while depositories assume additional control and responsibility.
• Some of the largest custodians globally include Bank of New York Mellon, State Street Bank, JPMorgan Chase, and Citigroup.

Special Considerations

While custodians and depositories are often used interchangeably, there are distinct differences between the two. Custodians primarily hold securities and valuables for investors, while depositories can offer additional services such as transaction settlements, account administration, and more.

Depositories play a vital role in facilitating the transfer of ownership of securities between investors and executing trades. They may also provide a range of financial services, including checking and savings accounts, fund transfers, and electronic payments.

Example of Safekeeping

For instance, investors who purchase fixed-income securities through their Wells Fargo Securities account can opt to have Wells Fargo Bank hold the securities in safekeeping for a fee. These securities are stored in a designated safekeeping account managed by Wells Fargo Bank, ensuring their security and facilitating transactions.