Q&A with Apricot: Where are my investments kept?

In our “Q&A with Apricot” series today, we’re addressing a question that new investors often ask: “Where are my investments kept?”

In the past, when you bought a stock, you received a physical paper certificate as proof of ownership. These certificates, often kept in bank vaults, were not only inconvenient but also vulnerable, as they could be lost, stolen, or damaged. This system was highly inefficient, making the process of tracking ownership and executing transactions time-consuming and risky. As financial markets grew and transactions became more frequent, this paper-based approach was no longer suitable. The need for a safer and more efficient system led to the creation of custodians and depositories, which now manage securities electronically, ensuring the safekeeping of billions of dollars in assets without the risks associated with physical documents.

Today, when you buy a stock, bond, or any other security, you do not receive a physical certificate. Instead, your investments are held by a very important financial institution: a custodian.

Who Is the Custodian, and What Is Its Role?

A custodian is a financial organization that holds and protects your assets—stocks, bonds, ETFs, and other securities. Imagine it as the bank for your investment assets, which holds the securities in a secure account, preventing their loss, theft, or damage.

We discussed the role of a custodian in detail in one of our previous posts, but here it is also important to understand the role of a depository.

Depository vs. Custodian: How They Cooperate

The difference between a depository and a custodian becomes clearer when we picture a two-tiered system.

• The Depository’s Role (The Central Registry) | The depository operates at the highest level of the financial system. It does not interact directly with individual investors. Instead, it provides master accounts and infrastructure for custodians (e.g., banks or brokerage firms). Its main function is to record the ownership of all securities at a national level. When a stock is sold, the depository updates its central registry to show that the security has moved from one custodian’s account to another.
• The Custodian’s Role | Your broker opens an account with a custodian, and that company (the custodian) holds your assets on your behalf. The custodian, in turn, holds your assets in its own account opened with the depository. The custodian performs all the administrative work for you.

Let’s use an analogy.

Imagine the depository is the registry for internet domain names (e.g., ICANN), which keeps the main list of all website names. It does not interact directly with any website owner. On the other hand, the custodian is your web hosting company (e.g., GoDaddy). You pay the hosting company to manage your website. This company acts as your agent, handles all the technical details, and registers your website’s name with the central registry on your behalf. In this example, ICANN is the depository, and GoDaddy is the custodian.

In the same way, your custodian safely holds your assets and manages all the details of your investments, but it does so through the centralized system provided by the depository. This two-tiered system guarantees that all assets are tracked with the highest level of security and transparency, making modern investing safe and efficient for everyone.

Apricot Capital acts as a one-stop-shop for every stage of the investment process

Apricot Capital provides both brokerage and custody services. This means that by opening an account with Apricot Capital, you get access to 40+ financial markets with low commissions, you can buy and sell securities using our app, and we ensure the execution of those orders and the safety of the securities. Apricot Capital acts as a one-stop-shop for every stage of the investment process.

Ready to Start Investing?

Open a brokerage account for free and download our Apricot app from the App Store or Google Play. Learn more about investing in Apricot Academy. 

It’s important to remember that investments are subject to market fluctuations and carry inherent risks. Consider your financial goals and risk tolerance before investing.

Apricot Capital is regulated by the Central bank of Armenia.

*The examples in this text are for illustrative purposes only. This does not constitute investment advice or a recommendation to buy or sell any specific investment instrument. The past performance mentioned in this text is not indicative of future results.