Custodial Service
Why use a Custodial service?
The use of a custodial service delivers benefits in the administration of your holdings, the ease with which you can transact, and the security of the assets themselves.
Holding your assets in custody means that we know exactly what is in your portfolio and the income that you are receiving from those assets. That allows us to deliver administration, reporting and record-keeping services. This streamlines the management of your portfolio (saving you time), and can, as an example, significantly simplify the process of meeting tax reporting obligations. (If all relevant assets are held in custody, this also enables us to present you with a full portfolio view in our reporting and via the Forsyth Barr website and mobile app.)
Holding assets in our custodial service also enables you to transact more efficiently, because we are able to settle transactions on your behalf without transferring securities to or from you personally. For international transactions, it is increasingly difficult, and in some cases not possible, to transact in securities that are not held in a custodial service.
A custodial service also facilitates your receipt of dividend payments, particularly for offshore securities. Again, increasingly for international holdings, dividend payments can only be paid into a local bank account. A custodial service collects and processes these payments for you, and ensures your dividends are received and administered in a timely manner.
How does Custody work?
In our custodial service, legal title to the asset (for example, shares) is held on your behalf by our custodial company. You retain all the rights and benefits of ownership – you are known as the beneficial owner. You can ask the custodial company to transfer the assets to you at any time.
Custody Structure
Our custodial company is Forsyth Barr Custodians Limited (FBCL). This is a distinct legal entity in the Forsyth Barr group of companies. Its board consists of a chair and two directors. Importantly, only one of this board can be associated with Forsyth Barr. The FBCL board currently has an independent chairperson and an independent director, and the board meets quarterly. This governance structure allows FBCL to remain independent of the rest of the Forsyth Barr group.
FBCL holds client assets on clients’ behalf and does not carry out any other activity. This helps ensure that should anything happen to Forsyth Barr, the client assets in custody are protected for the beneficial owner.
Controls and Monitoring
There is a formal control environment in place for client assets and custodial activities. As part of this process, custodial staff are physically separated from other functions, and clear reconciliation processes are in place. Our compliance monitoring programme tests whether these controls and processes are in place and operating effectively.
Our custodial service is also subject to an annual assurance engagement by an independent auditor. This is conducted in accordance with the International Standard on Assurance Engagements (New Zealand) 3402. Copies of the most recent assurance report are available to clients on request.
For trading in offshore securities, Forsyth Barr has appointed Citibank NA as global sub-custodian for all off-shore securities. Citibank NA is a global market leader, and is subject to full assurance reporting. These reports are reviewed by the board of FBCL.
Resident Withholding Tax on foreign income
Securities held in our custodial service may be liable for Resident Withholding Tax (RWT) on any interest or dividends received. Please read below for more details on the impact of RWT on securities held offshore.
For New Zealand resident clients.
Forsyth Barr Custodians Limited (FBCL) as custodian is required to deduct Resident Withholding Tax (RWT) on foreign interest and certain foreign dividends.
Interest
- Interest payments affected are those received from any foreign source.
- The RWT rate on interest paid to New Zealand residents is at your nominated RWT rate held in our records (or the relevant default RWT rate, if applicable). The amount of RWT deducted is reduced by any foreign withholding tax deducted overseas.
Foreign Dividends
- The foreign dividends affected are those paid by entities that meet one of the Foreign Investment Fund (FIF)* exemption criteria. For example, one of the more common FIF exemption criteria relates to companies that have shares listed on an approved index under the Australian Stock Exchange (ASX) Operating rules that meet certain other criteria.
- The RWT rate on dividends paid to New Zealand residents is 33%. The 33% rate applies regardless of whether an IRD number has been supplied.
These deductions are shown in your annual tax statements in NZD and are converted at month end currency rates for the month in which the dividend and/or interest was received.
We recommend you review your investments and seek specialist tax advice. For any queries regarding your Forsyth Barr account please contact your Investment Adviser.
* Note: In the case of other international securities which are FIFs, foreign tax will be withheld at source by FBCL’s overseas sub-custodian with no further RWT deduction made by FBCL.
Cash Management Service
The Forsyth Barr Cash Management service enables you to place your money at call for easy access, while earning interest.
The service is operated by Forsyth Barr Cash Management Nominees Limited (FBCMNL). Again, FBCMNL operates as a distinct entity with the Forsyth Barr group, and is overseen by a board consisting of a chair and two directors, only one of which can be associated with Forsyth Barr. The board currently has an independent chairperson and an independent director, and meets quarterly.
Client funds with the Cash Management service are pooled with others held in the service and invested on call with a registered bank.
As with custodial assets, FBCMNL holds the client funds on the clients’ behalf and does not carry out any other activity. This helps ensure that should anything happen to Forsyth Barr, the client funds are protected.
The activities of FBCMNL are subject to an annual assurance engagement by an independent auditor. This is conducted in accordance with the International Standard on Assurance Engagements (New Zealand) 3402. Copies of the most recent assurance report are available to clients on request.
Market Participation and Industry Standards
Forsyth Barr is a founding NZX Firm and an NZX market participant. Market participation and industry standards. It operates to the high standards of client care set out in the NZX Participant Rules and is subject to laws relating to client money and client property which are overseen by the Financial Markets Authority. It is also subject to regular inspections by NZX Regulation.
All Forsyth Barr advisers are required to be accredited by the NZX.
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