Custody

When you buy a share or ETF through a broker, you rarely hold the asset directly. Instead, a custodian - a regulated financial institution - holds the securities in an account on your behalf. The custodian handles settlement, corporate actions such as dividends, and record-keeping. In the GCC, brokers operating in the Dubai International Financial Centre (DIFC) must be licensed by the DFSA (Dubai Financial Services Authority), which sets rules on how client assets are held and segregated.\n\nThe key protection to look for is segregated custody. This means your assets are held in accounts that are legally separate from the broker's own assets. If the broker becomes insolvent, segregated assets cannot be claimed by the broker's creditors - your holdings remain yours. The alternative, pooled or omnibus custody, holds multiple clients' assets together, which can complicate recovery if a firm fails.\n\nFor crypto-assets, custody works differently. Assets held on an exchange are often held in omnibus wallets controlled by that exchange. Self-custody - holding your own private keys in a hardware wallet - removes counterparty risk entirely but places full responsibility on the investor. Regulated crypto custodians, where they exist, must meet specific capital and technology requirements set by their licensing authority.

For English-speaking expats in the GCC, custody arrangements matter because your home-country investor protection schemes almost certainly do not apply to you here. A UK retail investor using a DFSA-regulated broker in the DIFC is subject to DFSA client-asset rules, not the UK FCA's client money rules. Before opening any brokerage or crypto account, confirm whether the firm holds a custody licence from the relevant Gulf regulator - for example the DFSA in the DIFC, the Securities and Commodities Authority (SCA) in onshore UAE, or the Capital Market Authority (CMA) in Saudi Arabia - and ask specifically whether your assets are held in a segregated account in your name.\n\nCustody fees, sometimes called safekeeping fees, are a real cost drag on passive portfolios. They are typically charged in basis points per year on assets under custody. On a USD 200,000 portfolio, even 10 basis points (0.10%) amounts to USD 200 per year - compounded over a decade, that erodes a meaningful slice of returns. Always request a full fee schedule that separates custody fees from trading commissions and platform fees before transferring assets.