United States Department of Agriculture

Agricultural Marketing Service

Who must establish and maintain custodial accounts?

Each market agency selling livestock on commission or agency basis 

(market) subject to the Packers and Stockyards Act, 1921, (the Act) 

must establish and maintain a separate bank account designated 

as custodial account for shippers proceeds. The market acts as a 

fiduciary for livestock consignors funds. Fiduciaries have a legal 

responsibility to protect and preserve the funds entrusted to them for 

the true owners. Markets must establish custodial accounts in Federal 

Deposit Insurance Corporation (FDIC) – insured banks. They must 

designate the accounts as “Custodial Account for Shippers’ Proceeds,” 

or some similar designation. This designation informs the bank and 

others that the market is acting as a fiduciary and the funds in the 

account are trust funds (not owned by the market).According to the 

FDIC, “generally, each individual interest in a custodial account is 

insured up to $250,000. To obtain full insurance coverage, either the 

bank or the depositor must maintain accurate records identifying the 

interest of each individual in the custodial account.” Under the P&S 

Act, the each auction market must maintain accounts and records that 

disclose: (1) its handling of the custodial account; (2) the names of all 

consignors having an interest in the account; and (3) the amount due 

and payable to each consignor from funds in the custodial account.

Deposits to the Custodial Account

All money received from buyers in payment for livestock sold at 

auction, on a commission basis must be deposited directly to the 

custodial account before the close of the next business day after the 

sales day. 

Additionally, when (1) the market, (2) its owners, officers, or employees, or (3) other buyers to whom the market has extended credit buy 

consigned livestock, the market must deposit funds equal to the proceeds 

receivable for those livestock into the custodial account by the close of 

the next business day after the sale. Thereafter, upon receipt, markets 

must deposit proceeds received from buyers in payment for livestock 

sold on consignment directly into the custodial account. In addition, 

markets must reimburse the custodial account, in full, by the close of 

the 7th day after the sale for any uncollected proceeds receivable.

Withdrawals from the Custodial Account

Markets can only draw from the custodial account to pay (1) the net 

proceeds due to consignors or any person the market knows is legally 

entitled to payment, (2) lawful charges from consignors’ invoices, 

and (3) the charges due the market as compensation for its services. 

Lawful charges against a consignment include charges like trucking, 

brand, and health inspection fees, meat board, etc., which have been 

deducted from the sale proceeds, and were authorized by law or by 

the consignor. Markets are allowed to pay from the custodial account 

fees associated with the electronic remittance to consignors to the 

extent the market has set aside reserves for that expense by prefunding the account. 

The regulations under the Act prohibit markets from using the custodial account to (1) pay their own general expenses; (2) make advances 

on livestock consigned or purchased; (3) finance livestock buyers; or 

(4) finance their own livestock purchases.

www.ams.usda.gov Continued on back

Custodial Accounts

What is a custodial account?

A custodial account is a trust account. The account 

benefits livestock consignors. All payments for 

livestock by buyers and other funds deposited into 

the custodial account are trust funds.
Agricultural Marketing Service

Investing Custodial Account Funds

There are limited opportunities for markets to invest custodial 

account funds, since these are trust funds, held in trust by the market 

exclusively for the benefit of livestock consignors. An investment that 

moves trust funds out of a custodial account subjects those funds 

to risk. Without the protection of trust account status, creditors can 

attach those funds to the detriment of the livestock consignor, and 

rightful owner of the funds.

Markets may maintain custodial account funds in interest bearing 

savings accounts or invested in one or more certificates of deposit, to 

the extent the saving account and/or certificate of deposits are properly designated as a part of the custodial account, and maintained at 

an FDIC insured institution. The market must maintain the properly 

designated custodial savings account and certificates of deposits in 

the same institution as the custodial account. 

CDs must be made payable to the market as trustee of the custodial 

funds.

Analysis of Custodial Account

Each market must know whether the custodial account it maintains 

is in proper balance, and has adequate resources to cover all remittance checks and other obligations as they become due. To make 

such determination, a market should analyze the custodial account at 

least once a month, and it must retain the analysis, and all supporting 

schedules or documents as part of the market’s records. Packers and 

Stockyards Division (PSD) requires markets to submit analyses of the 

custodial account at least twice annually, showing the status of the 

custodial account on specific dates, as a part of regulatory activities. 

We review reports, and take further regulatory action as warranted by 

what the reports reveal.

If the analysis of a custodial account reveals a shortage, the market 

must take immediate action to correct the shortage. Typical corrective 

actions include transferring funds from the general account or other 

sources into the custodial account, or drawing on a line of credit to 

deposit an amount equal to the shortage into the custodial account. If 

the custodial account analysis reveals an overage, the market may leave 

the excess in the account, move the excess to an allowable custodial 

account investment, or transfer the excess funds to its general account.

Violations of the P&S Act

The following practices associated with custodial accounts are 

violations of the P&S Act:

• Custodial account shortages;

• Misusing custodial account funds;

• Failure to remit to livestock consignors when due;

• Failure to timely reimburse the custodial account for uncollected proceeds receivable; and

• Issuing insufficient funds checks or dishonored instruments 

to consignors.

Penalties for such violations can include cease and desist orders, 

suspensions of business operations, civil penalties up to a maximum 

of $28,061 per violation, or permanent injunctions, fines, and jail 

sentences for actions taken through the Justice Department.

Please direct comments or questions about this publication to 

United States Department of Agriculture 

Agricultural Marketing Service

Fair Trade Practices Program

Packers and Stockyards Division

1400 Independence Avenue S.W., Room 2507 

Washington DC 20250-3601 

Phone: 202-720-7051

Fax: 202-205-9237

Email: PSDWashingtonDC@usda.gov 

AMS Website: www.ams.usda.gov 

Toll-Free HOTLINE 

1-833-DIAL-PSD (1-833-342-5773)

This publication does not create or confer any rights for or on any 

person. Nor does it operate to bind the public. You can use an alternative approach, if the approach satisfies the requirements of the 

P&S Act, and regulations. See 7 U.S.C. 201(c), 205, 208, and 213(a), 

and 9 CFR 201.39, 201.42, and 201.43(a), which relate to content in 

this publication. You may also want to see 9 CFR 203.12.

USDA is an equal opportunity 

provider and employer. July 2019