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Say your brokerage collapses, you still have your stock right?
Posted on 3/15/23 at 2:20 pm
Posted on 3/15/23 at 2:20 pm
I’m not fearing that my brokerage is going to collapse or anything but just started thinking about it and was curious.
In a traditional bank, I give them money. They go reinvest that money (safely most of the time). So when there’s a bank run or they have a big loss on their investment, the money isn’t there to give it back to me.
In a brokerage, they take my money but have to go buy stock on my behalf. They don’t go reinvest it for themselves (or maybe somehow they do and I don’t know) so theoretically I would think the stock is being held by the bank. So even if the brokerage collapses, they’d still distribute my stock out to me wouldn’t they?
In a traditional bank, I give them money. They go reinvest that money (safely most of the time). So when there’s a bank run or they have a big loss on their investment, the money isn’t there to give it back to me.
In a brokerage, they take my money but have to go buy stock on my behalf. They don’t go reinvest it for themselves (or maybe somehow they do and I don’t know) so theoretically I would think the stock is being held by the bank. So even if the brokerage collapses, they’d still distribute my stock out to me wouldn’t they?
8
Posted on 3/15/23 at 2:22 pm to Weagle25
Looks like us mattress baws are gonna get a better return than you stock baws this year
And probably from now on
And probably from now on
Posted on 3/15/23 at 2:24 pm to Weagle25
Brother, if the bank system collapses the dollar isn't far behind it. And if the dollar is worth nothing, stocks are worth even less.
Posted on 3/15/23 at 2:24 pm to Weagle25
quote:
In a brokerage, they take my money but have to go buy stock on my behalf. They don’t go reinvest it for themselves (or maybe somehow they do and I don’t know) so theoretically I would think the stock is being held by the bank. So even if the brokerage collapses, they’d still distribute my stock out to me wouldn’t they?
I don’t think that’s a foregone conclusion for any account north of $250k assuming your brokerage is a member of the FDIC.
Look at what happened to the people who had crypto at the companies who folded this year, some of those people lost their arse.
Posted on 3/15/23 at 2:44 pm to Weagle25
I had this thought yesterday. Stock is literal ownership of a company so the stock will still belong to you. I imagine the stock would just get transferred to another firm?
Posted on 3/15/23 at 2:44 pm to Weagle25
Securities are covered by SIPC I believe, up to $750k IIRC. Whether or not you get your shares or just the fair market value of those shares at the time of collapse is a great question I don’t have the slightest clue the answer to.
Posted on 3/15/23 at 2:51 pm to tide06
quote:Brokerage accounts are typically covered by SIPC up to $500k including $250k in cash. However it’s actually safer than that since the account holder owns the securities, and they still own them even if the brokerage fails. So really the only reason one would have to be concerned is if the brokerage was fraudulently recording purchase and sales of the securities for the customers, but wasn’t actually buying or selling them.
I don’t think that’s a foregone conclusion for any account north of $250k assuming your brokerage is a member of the FDIC.
Even then, I believe each account at a brokerage get separate coverage. So for example, you could have an individual taxable account, an IRA, joint account with your wife, your wife has her individual accounts, etc. and each would have coverage up to $500k with a single brokerage.
So theoretically, a typical couple could have as many as 9 accounts with a brokerage (each with an individual taxable, IRA, and Roth plus a joint of all 3). That seems overboard but it is possible. And I guess theoretically you could have a SEP-IRA or a solo401k, so even more than those other 3.
Posted on 3/15/23 at 2:59 pm to Weagle25
If vanguard collapses we’re fricked
Posted on 3/15/23 at 3:02 pm to whiskey over ice
quote:
If vanguard collapses we’re fricked
Who’s gonna give 10 million to Hillary if vanguard collapses?
Posted on 3/15/23 at 3:15 pm to Pauvetibete
quote:
Brother, if the bank system collapses the dollar isn't far behind it. And if the dollar is worth nothing, stocks are worth even less.
I’m not talking about an entire banking system collapse.
Just a theoretical world where just the brokerage I use collapses.
Posted on 3/15/23 at 3:22 pm to Weagle25
The brokerage owns the securities you own in a margin account.
I personally use a cash account at Schwab so that they cannot loan out my securities.
This is why you have to have a margin account in order to short individual stock(s).
Margin accounts are rehypothecated over and over just as the banking system itself is. Rehypothecation itself is one of the reasons why there has been a severe shortage of good collateral leading to trillions in reverse repos overnight.
If the system itself was true and transparent, the risks wouldn’t be near as great.
Here is more on rehypothecation from the IMF:
LINK
I personally use a cash account at Schwab so that they cannot loan out my securities.
This is why you have to have a margin account in order to short individual stock(s).
Margin accounts are rehypothecated over and over just as the banking system itself is. Rehypothecation itself is one of the reasons why there has been a severe shortage of good collateral leading to trillions in reverse repos overnight.
If the system itself was true and transparent, the risks wouldn’t be near as great.
Here is more on rehypothecation from the IMF:
LINK
This post was edited on 3/28/23 at 2:04 pm
Posted on 3/15/23 at 4:48 pm to el Gaucho
Apple shares can still trade in Chinese Yuan baw.
Posted on 3/15/23 at 5:08 pm to Weagle25
It is tricky. Most brokers don't actually hold the stock certs. They are at the DTCC and they get loaned around like little ious.
Thus, the movement to DRS (direct register shares). Once that is done with the company that is the transfer agent of your stock, many use ComputerShare and American Stock Transfer, the shares are in your name. Until then,
I sure as hell don't trust the DTCC. They did commit international securities fraud last summer.
Thus, the movement to DRS (direct register shares). Once that is done with the company that is the transfer agent of your stock, many use ComputerShare and American Stock Transfer, the shares are in your name. Until then,
I sure as hell don't trust the DTCC. They did commit international securities fraud last summer.
Posted on 3/15/23 at 8:38 pm to Weagle25
quote:
So even if the brokerage collapses, they’d still distribute my stock out to me wouldn’t they?
In virtually all cases that aren’t fraud, you’ll have your account transferred to another firm and you’ll get your shares like nothing happened.
The SIPC limits really only apply when there is fraud.
Posted on 3/15/23 at 10:18 pm to GhostOfFreedom
quote:Link?
I sure as hell don't trust the DTCC. They did commit international securities fraud last summer.
Posted on 3/15/23 at 10:43 pm to el Gaucho
quote:
Hu’s gonna give 10 million to Hillary if vanguard collapses.
fify
Posted on 3/16/23 at 1:22 pm to tide06
quote:You should opt for silence when you don't know WTF you are talking about.
I don’t think that’s a foregone conclusion for any account north of $250k assuming your brokerage is a member of the FDIC.
Posted on 3/18/23 at 1:26 am to whiskey over ice
quote:
If vanguard collapses we’re fricked
This.
However, my lego investing
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