For Example: Suppose, you have invested in a mutual fund. Then the mutual fund invests it in other companies (stocks), the stocks bought by the mutual fund won’t remain with the mutual fund anymore. It will be in the hands of the custodian of the particular mutual fund.

                                     Every mutual fund has a custodian. Custodian is separate from mutual funds. Just like Nepal Rastriya Bank (NRB) regulates banks likewise Securities Exchange Board of Nepal (SEBON), every mutual fund comes under SEBON. And as per regulation of SEBON every Mutual fund has to choose a custodian which has to be separate from that mutual fund company. When a mutual fund scheme starts from a mutual fund company and the company buys any sort of shares or bonds, the shares or bonds are in the hands of the custodian with the responsibility of safety as well.

                                      And in near future, if any particular mutual fund company wants to bail or get out of the mutual fund business and wishes to quit their mutual fund business. Then the mutual fund company has to find another mutual fund company to which they can transfer their business.

So, the mutual fund company cannot be non-existent all of a sudden. If the mutual fund company wants to be out of the mutual fund business, they have to find some other mutual fund to transfer their business which leads to safety for investors and there is also not much fear of mutual fund companies running away. So, for the safety of investors SEBON has done two things which are mentioned below:

·  Custodians should be different from mutual fund companies.
·  If any mutual fund company wants to be out of mutual fund business, then they have to find some other mutual fund company.