The Parliamentary Joint Committee on Corporations and Financial Services (PJC) has urged ASIC to consider replacing the term 'custodian', because it creates false expectations among investors of the responsibilities of these organisations.

The PJC yesterday said the term was inappropriate and suggested custodians should be called 'manager's payment agent'.

"The committee considers that the word 'custodian', particularly as used in product disclosure statements, is inappropriate," the PJC said in its final inquiry report into the collapse of Trio Capital.

"It urges ASIC to find another term; one which does not give unwarranted reassurance to investors," the committee said.

ASIC is currently conducting a review of the custodian industry to see if they could play a greater role as gatekeepers and inform the regulators of suspicious transactions involving their clients.

But the industry has hit back, saying they merely execute orders - and that the duty lies with a fund's responsible entity (RE).

ANZ Custodian Services, National Australia Bank Asset Servicing and the Australian Custodian Services Association, in separate submissions to the PJC, argued that the custodian's role and function is to hold assets on behalf and upon instruction of the RE.

"Its duty, which is owed exclusively to the RE, is to act on proper instructions from the RE in relation to those assets," ANZ said in its submission.

"The role of the RE is to manage the assets of the scheme, including activities such as investment strategies and valuations."

But the PJC urged ASIC to lay greater responsibility upon custodians.

"The committee urges ASIC to consider safeguards that a custodian could put in place to ensure it's able to identify, and report, suspicious transfers that do not trigger existing anti-money laundering provisions," it said.