Legal Rules Governing Custodians’ Activities

Although the terms “custody,” “custodian,” and a “custodianship agreement” play a crucial part in the capital market, there are no unified understandings of these concepts. In most cases, commercial usage of these concepts is confused with their legal usage. Even in most jurisdictions such as Iran, there is no accurate and complete understanding of custodian, its function, and legal consequences arising from a custodial relationship. The financial crisis of 2008, by unearthing the existing rules’ gaps regarding the custodians’ activities such a non-restitution of investors’ assets or a long delay in their restitution, made regulation of custodians’ activities a must. This article discusses the most important legal risks in the custodians’ activities. In so doing, it closely looks at the laws of specific domestic legal regimes such as the UK, US, and India. The purpose of the paper is to introduce the concept of a custodian into Iran’s finance law scholarship and to answer the following questions. Do the Iranian capital market laws recognize the concept of a custodian? If not, is there any need for the presence of this institution in Iran’s capital market?