Legal Definitions - safekeeping

Safekeeping refers to the act of protecting something valuable or important that has been entrusted to one's care. It implies a responsibility to guard an item or asset against loss, damage, or unauthorized access.

In a more specific legal context, particularly within financial regulations like the Securities Investor Protection Act, safekeeping describes the practice where a financial institution, such as a brokerage firm, holds an investor's securities (like stocks or bonds) on their behalf after the investor has purchased them. This ensures the securities are protected and properly accounted for, even though the investor does not physically possess the certificates.

• Example 1 (General - Physical Item): A couple going on an extended overseas trip deposits their valuable antique jewelry and important paper documents, such as their will and property deeds, into a safe deposit box at their local bank. The bank, by providing the secure vault and controlled access, is performing the act of safekeeping for these items. This illustrates safekeeping because the bank is protecting the couple's valuable physical assets that have been placed in its custody.

• Example 2 (General - Digital/Data): A cloud storage provider offers a service to businesses to store their critical digital data, including customer records, financial reports, and proprietary software code. The provider implements robust encryption, backup systems, and cybersecurity measures to prevent data breaches or loss. This demonstrates safekeeping as the provider is protecting digital assets entrusted to its care from harm or unauthorized access.

• Example 3 (Specific - Securities): An individual invests in several company stocks through an online brokerage account. Instead of receiving physical stock certificates, the brokerage firm holds these securities electronically in the investor's name. The firm is legally obligated to maintain these assets securely and ensure they are available to the investor when they decide to sell or transfer them. This is an example of safekeeping under financial regulations, where the brokerage firm is holding the investor's securities on their behalf, ensuring their protection and proper management.