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In an SEC report, Franklin Templeton Holdings Trust (ticker: FGDL), an Investment Trust that holds gold bullion, has highlighted the importance of adequate gold insurance for the Fund’s gold custodian.
The report clarifies that the Custodian is responsible for safely storing the Fund’s gold, providing regular reports detailing the movement of gold bullion, and the use of reasonable care when selecting sub-custodians. The Fund’s gold bullion is held at nominated vault premises, with the custodian maintaining insurance coverage on these premises.
However, it is important to note that the Fund itself will not be a beneficiary of any such insurance and does not have the ability to dictate the nature or the amount of the coverage. This means that shareholders cannot be assured that the Custodian maintains adequate insurance or any insurance regarding the gold bullion held on behalf of the Fund.
Gold bullion held in the Fund Allocated Account is considered the property of the Fund and is not traded, leased, or loaned under any circumstances.
On the other hand, gold bullion bars in an unallocated account are not segregated from the Custodian’s assets, resulting in the account holder having no ownership interest in any specific bars held. Unsecured creditors of the bullion dealer, the account holder, are at risk of the dealer’s insolvency, which could complicate matters in case the liquidator is unable to identify any gold bullion held in an unallocated account.
The Trustee for the Trust is Delaware Trust Company, a subsidiary of the Corporation Service Company, whose duties include accepting legal process served on the Trust in the state of Delaware and the execution of any certificates required under the Delaware Statutory Trust Act.
The Trustee’s liabilities are limited to those mentioned in the Declaration of Trust.
BNY Mellon (BNYM) serves as the cash custodian for the Fund, and JPMorgan serves as the Gold Custodian for the Fund’s gold bullion. The Custodian facilitates the transfer of gold bullion into and out of the Fund through the Unallocated Gold Accounts that it may maintain for authorized participants and the Allocated Gold Accounts it maintains for the Fund. Under the Allocated Gold Account Agreement, the Custodian is obliged to use commercially reasonable efforts to obtain delivery of gold bullion from sub-custodians appointed by the Custodian.
In conclusion, despite Franklin Templeton Holdings Trust’s attempt to ensure the safety of gold bullion stored in their Fund, it is clear that the Fund may not be a beneficiary of its custodian’s insurance.
Shareholders should remain vigilant and aware of the possible risks associated with investing in such an asset class.
Note that we may hold securities mentioned in this article. All data is based on recent SEC filings. Even though we have implemented various manual and automatic fact-checking and data acquisition processes, some incorrect information may have slipped through (false positive). Let us know if you find any inconsistencies!