How do I register and activate linked or custody accounts?
This article instructs agents on registering and activating linked accounts or custody (nominee) solutions for customers, covering documentation, transfer processes, tax implications, and operational considerations.
Overview
Linked or custody accounts allow customers to consolidate holdings under a nominee or manage multiple accounts with linked permissions. This is common for custodial arrangements, external custodians, and clients who want centralized reporting. Activation requires clear authorization and careful handling of legal and tax implications.
Types of linked accounts
- Nominee custody: Securities are held in the name of the nominee while the customer retains beneficial ownership.
- Linked client accounts: Multiple accounts under one customer aggregated for reporting or funding purposes.
- Custodian-managed: A third-party custodian holds securities and instructs trading through the client account.
Prerequisites and documentation
- Written authorization from the beneficial owner
- Custody or nominee agreement signed by both parties
- Identification and KYC for both beneficial owner and nominated custodian
- Power of attorney or mandate if a third party acts on behalf of the owner
Step-by-Step Activation
- Confirm type and objective: Clarify whether the customer wants a nominee, linked reporting, or third-party custodian arrangement.
- Collect agreements: Obtain signed custody/nominee agreement and any mandate or POA documentation.
- Verify KYC for all parties: Perform ID, address verification, and UBO checks for both the beneficial owner and custodian.
- Configure account linking: In the system, link accounts for reporting, funding, or custody according to the agreement terms.
- Transfer assets: Initiate transfer of securities or cash using internal transfer forms or external transfer instructions, including ISIN and quantity verification.
- Confirm tax and reporting setup: Ensure tax reporting and dividend handling is consistent with nominee rules and the customer's tax residency.
- Notify customer: Send confirmation of activation, including access rights, reporting cadence, and contact points for custody inquiries.
Important Notes and Warnings
⚠️ Legal ownership vs beneficial ownership: Nominee arrangements change the registered owner but not beneficial ownership. This has tax and voting implications that must be explained and documented.
⚠️ Transfers: Transfers into nominee custody can take several business days and require precise matching of ISINs and holdings to avoid settlement issues.
Frequently Asked Questions
Q: Can dividends be paid directly to the beneficial owner?
A: Dividends are usually paid to the nominee and then forwarded per the custody agreement; clarify the specific arrangement with the client.
Q: How are shareholder rights handled?
A: Voting rights often pass through the nominee based on client instructions. Ensure the custody agreement specifies voting procedures.
Troubleshooting
| Issue | Solution |
|---|---|
| Transfer failed due to ISIN mismatch | Verify ISIN and share class. Coordinate with sending custodian for correct identifiers. |
| Dividend withholding confusion | Review nominee tax treatment and confirm whether reclaims are possible for the beneficial owner. |
| Dispute over beneficial ownership | Escalate to legal with full documentation and signed agreements. |
Related Information
- How to transfer assets between accounts
- Tax implications of nominee custody
- Corporate actions handling for nominee accounts
Maintain meticulous records of custody agreements and transfers. For any legal ambiguity or disputes, escalate to the legal team immediately and suspend transfers until resolved.