What Is a Corporate Agent?
A corporate agent is a type of trust company that acts on behalf of corporations and some forms of governmental entities. Corporate agents provide various types of banking services for corporate clients, such as check clearing, payment of interest and dividends, and stock purchases and redemptions. They can also collect taxes on behalf of governmental agencies.
- A corporate agent is a type of trust company that acts on behalf of corporations and some governmental agencies.
- A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of another person or entity.
- Corporations use corporate agents to facilitate a variety of functions, such as a custodian for trusts and estates, asset management, facilitating stock transfers, and overall banking needs.
- Corporate agents allow companies to outsource certain tasks thereby freeing them to efficiently utilize internal resources related to the core business.
- Most banks are corporate agents and are given specific functions by a corporation to execute and manage. Corporate agents do not have free will to make all decisions.
Understanding a Corporate Agent
Corporations need banking services just as individuals do. A corporate agent is chosen and entrusted by a corporation to execute specific services as defined by it. The majority of these services are simple banking functions but can also include various legal functions.
Outsourcing certain banking functions as opposed to using company personnel to manage them allows companies to efficiently allocate their resources, devoting more time to company business than certain administrative tasks.
Utilizing a corporate agent can also reduce costs, as a business won't have to hire and train personnel to perform banking or administrative functions. This is, of course, if the fees charged by a corporate agent are less than that of hiring personnel and training them.
Responsibilities of a Corporate Agent
As noted above, a corporate agent is in the form of a trust company. A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of another person or entity. Services include, but are not limited to, acting as a custodian for trusts and estates, asset management, facilitating stock transfers, beneficial ownership registration, and other related arrangements.
While trust companies often support individuals (generally, high-net-worth ones) in managing personal assets, corporate agents will liaise with corporations. Banks can act as corporate agents in order to generate additional revenue.
This diversifies their income stream away from just the retail banking sector and gives them a more stable revenue base. Most of the services that corporate agents provide are noncredit services, which means the service doesn't involve any extension of credit.
The relationship between a business and a corporate agent are usually pre-defined in a contract beforehand. In most cases, a corporate agent won't have complete free will to execute all decisions for a business, but rather only a select few areas. In any gray areas, a corporate agent will have to first confirm with the company before taking any action.
Example of a Corporate Agent
Citibank’s Agency and Trust division delivers agency, fiduciary, tender and exchange, depositary, custody, and escrow services. Citi Agency and Trust serves over 2,700 clients, including corporations, financial institutions, and public sector entities.
Operating in both developed and emerging markets, this division administers more than $6 trillion in assets. Citi Agency & Trust sees itself as a one-stop solution for a range of capital markets transactions. Primary offices are in New York, London, California, São Paulo, Mexico City, Dubai, Moscow, Hong Kong, and Seoul. Citi’s network of technical specialists and client service professionals globally have expertise in local markets at country and jurisdiction levels.
Clients of a corporate agent may receive access to state of the art technologies in the market, including specific analytics and reporting tools. Citi’s Agency and Trust investor reporting system is administered online and provides clients immediate access to detailed deal information, along with automatic email updates and customization around particular portfolios.
A specific example of a service Citi and other corporate agents may provide clients are structured finance services. Structured finance encompasses highly involved financial instruments, such as collateralized debt obligations (CDOs), usually only appropriate for large financial institutions or companies that have complex financing needs.