International Law

THE CUSTODY OF SECURITIES IN THE NETHERLANDS CARIBBEAN

By Karel.Frielink

Separate legal entity

Generally, securities that must be held by a Netherlands Antilles bank on behalf of its clients will be held by a custodian. In most cases the custodian is either a foundation (?stichting?) or a wholly owned subsidiary (NV or BV) of the bank.

The scope of the activities of the custodian will be limited to holding shares, bonds, notes, certificates and other securities. The insolvency risk of the custodian is therefore minimized. Alternatively, these securities can also be held in the name of the custodian by independent custody companies abroad, including brokers, agents and sub-custodians. In both cases, the securities will not form part of the assets of the bank and will not form part of the bank?s estate if the bank becomes bankrupt.

The custody of securities is regulated by a Custody Agreement between the bank and the custodian. Provisions are laid down therein to the effect that the bank guarantees compliance with custody obligations by the custodian in accordance with market practice.

The custodian shall not be responsible for any act, omission, or default of, or for the insolvency of, any broker, agent or sub-custodian provided that it has used reasonable care in the appointment, supervision and control of them.

Karel Frielink
Attorney (Lawyer) / Partner

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Full post as published by Karel's Legal Blog on December 05, 2009 (boomark / email).