Fund Custody Agreement
A fund custody agreement is a legal document that outlines the terms and conditions under which a custodian bank or financial institution will hold and safeguard the assets of a mutual fund or investment fund. The agreement typically covers the responsibilities of the custodian, including the safekeeping of securities, settlement of trades, and the collection of income on behalf of the fund.
Key elements of a fund custody agreement may include:
1. Appointment of Custodian: This section specifies the appointment of the custodian and outlines its duties and responsibilities.
2. Custody of Assets: Details the types of assets that will be held in custody, such as cash, stocks, bonds, and other securities, and how they will be managed.
3. Safekeeping and Segregation: Outlines the custodian’s obligation to keep the fund's assets separate from its own assets and those of other clients.
4. Recordkeeping and Reporting: Specifies the requirements for maintaining accurate records of the fund's holdings and providing regular reports to the fund manager.
5. Fees and Expenses: Details the fees and expenses associated with the custodian's services and the responsibilities for payment.
6. Liability and Indemnification: Addresses the allocation of liability between the fund and the custodian, as well as indemnification provisions.
7. Termination: Outlines the process for termination of the agreement and the transfer of custody to another institution.
It's important for fund managers and custodians to carefully review and negotiate the terms of the fund custody agreement to ensure that the interests of the fund and its investors are adequately protected.
Please note that the specific wording and content of the agreement may vary depending on the jurisdiction and the parties involved. It's advisable to seek legal counsel when drafting or entering into a fund custody agreement to ensure compliance with relevant regulations and industry best practices.
