SIE Knowledge of Capital Markets Question 32: Answer and Explanation

Question: 32

Which of the following statements is true regarding a custodian for a trust?

• A. A custodian may be a natural person.
• B. The trustee is chosen by the custodian.
• C. The custodian maintains possession of the investments in the trust.
• D. The custodian has a fiduciary responsibility to make choices for the benefit of the beneficiary.

Correct Answer: C

Explanation:

C: Choice C is correct because the custodian is named in the document that establishes the trust, and holds the items owned by the trust. Choice A is incorrect because a custodian is a company, such as a financial institution. Choice B is incorrect because the trustee chooses the custodian. Choice D is incorrect, unless the trustee is the custodian, because the trustee has the fiduciary responsibility.