In Saudi Arabia, the Capital Market Authority (CMA) requires any app dealing with local investment funds to have a Custodian, as their presence is essential in any regulated investment system.
The Custodian is the entity that holds assets and shares under its legal name but records everything internally under the client's name. When you buy a fund or stock, ownership isn't registered directly in your name in the market because thousands of trades happen daily, making direct transfer administratively impossible.
For this reason, shares are registered under the Custodian (usually a bank or licensed institution). The market needs a central entity to hold all assets and ensure no manipulation.
Two Types of Ownership
- Legal Ownership: Under the Custodian.
- Beneficial Ownership: Under you.
The Custodian keeps precise records: who owns how many shares in which fund and their value, sending daily reports to the CMA for monitoring.
Think of the Custodian as the financial lawyer for your money. Their job is to hold, reconcile, and ensure nothing is touched without your consent. Without them, there is no trust between tech and money.