A depository bank (

U.S. The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 states and a federal capital district, Washington, D.C. The 48 contiguous ...

usage) or depositary bank (predominantly EU usage) is a specialist financial entity which, depending on jurisdiction, facilitates investment in

securities market Security market is a component of the wider financial market where securities can be bought and sold between subjects of the economy, on the basis of demand and supply. Security markets encompasses stock markets, bond markets and derivatives ma ...

Depository banks in the United States

In the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

, a depository is a bank organized in the US which provides all the stock transfer and agency services in connection with a depositary receipt program. This function includes arranging for a custodian to accept deposits of ordinary

shares In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...

, issuing the negotiable receipts which back up the shares, maintaining the register of holders to reflect all transfers and exchanges, and distributing

dividend A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...

s in

U.S. dollars The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...

Depositary banks in the European Union

In the EU, a depositary is a financial institution which provides

fiduciary A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (legal person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, ...

/custodian services to

Investment Funds An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages inc ...

authorised to trade in any EU jurisdiction as a

UCITS The Undertakings for Collective Investment in Transferable Securities Directive (Directive 2009/65/EC, "UCITS") is a directive of the European Union (EU) that allows collective investment schemes to operate freely throughout the EU on the basis o ...

or Alternative Investment Fund. Both the UCITS (2009/65/EC) Directive and AIFMD (2011/61/EU) Directives require that authorised investment funds have a depositary appointed to the fund to safekeep the assets of the fund (whether by taking them into custody, or record-keeping and verifying title of them) and oversee the affairs of the fund to ensure that it complies with obligations outlined in relevant laws and the fund's constitutional documents. Depositaries have been subject to significantly increased regulation in the EU in recent years and the proposed “UCITS V” directive proposes to continue this trend by imposing a “

strict In mathematical writing, the term strict refers to the property of excluding equality and equivalence and often occurs in the context of inequality and monotonic functions. It is often attached to a technical term to indicate that the exclusiv ...

” standard of depositary liability for the loss of fund assets, other than in certain circumstances.

References

{{DEFAULTSORT:Depository Bank Banking Legal entities