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Presentation at the ASEA Conference. Johannesburg - 19 September 2006. Custody Service: An Indispensable Link In a Financial Market. Augustine Kwakye-Agyekum. Regional Deputy Head – Barclays Securities Administration (BSA). Agenda. Structure of a capital market
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Presentation at the ASEA Conference Johannesburg - 19 September 2006
Custody Service: An Indispensable Link In a Financial Market Augustine Kwakye-Agyekum • Regional Deputy Head – Barclays Securities Administration (BSA)
Agenda • Structure of a capital market • The concept of custody/securities service – what is it • Illustration of investor/custodian relationship • Do’s and don’ts of a custodian • The nominee concept • Contractual documentation in a custodian relationship • African stock exchanges and custodian presence • Questions and Answers
What is a Custody Service? • It is a securities administration • It involves settlement of securities and safekeeping of such securities • The service becomes relevant after a decision to buy and/or sell securities is taken by an investor or his Fund Manager • Custodians are, therefore, not Fund Managers, Investment Advisors nor Brokers • Neither are they branch securities officers
Investor-Custodian Relationship Stockbroker Investor Custodian Investor
What Custodians Do • Trade settlement • Ensuring investor ownership is secured • Re-registration of assets • Safekeeping of clients’ assets • Income collection • Corporate actions management
What Custodians Do (cont’d.) • Proxy voting services • Banking transactions • Reporting to clients • Provision of market information to clients
What Custodians Do Not Do • Execute trade • Advice on investment selection • Advice on corporate actions election • Advice on proxy voting • Organise trades between clients
Why the Need of a Custodian • Use of a custodian is international best practice • It is a regulatory requirement in some countries, e.g. Kenya • It allows Fund Managers to concentrate on their expertise of investment management • It reduces risk
Custodians are Not Beneficial Owners of Securities • They act only as a custodian or an administrator of securities • Clients’ assets are separated from those of the Custodian Bank - the concept of a nominee company • It is to safeguard clients’ assets
Documentation • The following are basic contractual documents required to establish a custody relationship • Custody Agreement – the main contract • Service Level Agreement (SLA) – which addresses all service requirements • Tariff Agreement – a schedule of fees to be charged for the service/relationship
NO CUSTODY PROVIDER ONE CUSTODY PROVIDER MORE THAN ONE PROVIDER Algeria Ethiopia Malawi Mozambique Sudan Tanzania Nigeria Swaziland WAMU (Ivory Coast) Botswana Egypt Ghana Kenya Mauritius Morocco Namibia South Africa Tunisia Uganda Zambia, & Zimbabwe African Stock Exchanges
Conclusion Custodians are partners in the development and efficient running of a capital market
Contacts Chris Wooldridge – Regional Head of BSA • Tel.: +27 11 772 7468 • Email: chris.wooldridge@barclays.com Augustine Kwakye-Agyekum – Regional Deputy Head of BSA • Tel.: +27 11 772 7382 • Email: augustine.kwakye-agyekum@barclays.com