Nominee company

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A wholly-owned subsidiary of a custodian used as a nominee company to hold legal title to client investments (other than cash). This common structure in the UK custody Market was in fact endorsed by Peter Bloxham's Final review of the Investment Bank Special Administration Regulations 2011 in January 2014, the third recommendation of which was:

Use of Nominee Companies

3 FCA should consider encouraging firms, in appropriate cases, to use a wholly-owned subsidiary as the nominee company to hold legal title to client investments (other than cash).

The report noted:

"... the rapid transfer of client positions to a solvent successor firm was facilitated by the fact that the failed firm held substantially all its (UK) custody assets in the name of a separate nominee company subsidiary. It was possible to transfer the shares in that nominee company as part of the transfer of client positions. The transfer of the shares in the nominee company was sufficient to produce the result that all the client holdings registered in that nominee passed into the control of the transferee, without the need for transfers of individual holdings. I recommend that consideration be given by the FCA to encouraging this practice."

Template:CASS Section 6.2.4 (View Template)

Yes, the CASS rules really say "with respect of". And they don't say the same level responsibility as what. So nice bit of drafting there, ladies and gentlemen of the European Union.

And if you were wondering what a "nominee company" is:

Template:CASS Section nominee company (View Template)

Discussion

Note a nominee is not a custodian per se. It is a dedicated entity which does nothing other than acting as a registered owned of shares.