Are Our Accounts Safe?

[Xuanxue]

So when brokerage firms liquidate and accounts dry up and/or are stolen, given the fiasco in financials, we're to believe SIPC and NASAA will have the resources to recover our accounts?

I had read that SIPC, if proper protocols are adhered to in filing a claim, will recover up to $500,000 total assets per account - but only $100,000 in cash. Oh? Any of this sounding familiar? Transactions in securities and foreign exchanges aren't FDIC insured, but SIPC sounds more like a panderer of false hope like the FDIC. And when bullets hit bones moguls will get paid first.

Anyone recall in their history books when 'ole Franklin "eat this new deal" Roosevelt allowed banks and brokerage firms to default on their obligations to pay speculators?

Factor wiretransfers into your PNLs for anything over a 100K, and even then, I wouldn't count on a full recovery in the event of a meltdown.

 

[crgarcia]

Quote from Xuanxue:

So when brokerage firms liquidate and accounts dry up and/or are stolen, given the fiasco in financials, we're to believe SIPC and NASAA will have the resources to recover our accounts?

I had read that SIPC, if proper protocols are adhered to in filing a claim, will recover up to $500,000 total assets per account - but only $100,000 in cash. Oh? Any of this sounding familiar? Transactions in securities and foreign exchanges aren't FDIC insured, but SIPC sounds more like a panderer of false hope like the FDIC. And when bullets hit bones moguls will get paid first.

Anyone recall in their history books when 'ole Franklin "eat this new deal" Roosevelt allowed banks and brokerage firms to default on their obligations to pay speculators?

Factor wiretransfers into your PNLs for anything over a 100K, and even then, I wouldn't count on a full recovery in the event of a meltdown.

Even if the SIPC doesn't has enough funds to cover a liquidation, the gov't will give money.

Make sure your broker is registered with the SEC, SIPC, NFA, etc.
Make sure your broker is a US company. (i.e. avoid foreign firms like MF Global).

 

[bpcnabe]

Quote from crgarcia:

Even if the SIPC doesn't has enough funds to cover a liquidation, the gov't will give money.

Make sure your broker is registered with the SEC, SIPC, NFA, etc.
Make sure your broker is a US company. (i.e. avoid foreign firms like MF Global).

SIPC does not insure commodity/futures accounts, only equity accounts. MF Global does not offer equity trading to US residents.

Tell me, does Velocity or OEC or whatever offer SIPC protection unless excess futures cash balances are swept into a Universal account like IB?

 

[G-Boa]

I understood SIPC is fully funded since it's something all brokerages are required by law to pay into each month/quarter (in order to maintain registration status as a brokerage)

versus FDIC, which harnessed by the taxpayer, i mean federal government.

 

[jeb9999]

Quote from G-Boa:

I understood SIPC is fully funded since it's something all brokerages are required by law to pay into each month/quarter (in order to maintain registration status as a brokerage)

versus FDIC, which harnessed by the taxpayer, i mean federal government.

Fully funded compared to what?

As of 12-31-2007 SIPC had net assets of $1.5 billion. How far will that go if a major broker goes under? Of course the SIPC will just assess all brokerage firms to make up any shortfall.

From 1996 through 2007 each SIPC member paid a $150 annual assessment. It cost the major brokerage firms way more to process the SIPC paperwork and write the check than than the $150 they pay.

 

[G-Boa]

Quote from jeb9999:

Fully funded compared to what?

As of 12-31-2007 SIPC had net assets of $1.5 billion. How far will that go if a major broker goes under? Of course the SIPC will just assess all brokerage firms to make up any shortfall.

From 1996 through 2007 each SIPC member paid a $150 annual assessment. It cost the major brokerage firms way more to process the SIPC paperwork and write the check than than the $150 they pay.

fully funded relative to their obligations to account holders.

if it has net assets of $1.5b, i wonder how that compares to net potential obligations???

we're just talking securities and cash here...again...from what i understand. up to $400k securities plus $100k per account.

 

[hughb]

This is actually kind of funny. I'm nowhere near the $100K mark in either my bank or brokerage account, but here I am worrying about having enough insurance. It's kind of like the noob trader who has yet to have a profitable year in the market complaining about over-taxation.

 

[jeb9999]

Quote from G-Boa:

fully funded relative to their obligations to account holders.

if it has net assets of $1.5b, i wonder how that compares to net potential obligations???

we're just talking securities and cash here...again...from what i understand. up to $400k securities plus $100k per account.

Let's look at just one brokerage firm. As of 03-31-2008 Charles Schwab had $1.393 trillion in customer assets. Yes, that is trillion with a "T". What would happen if the SIPC had to liquidate a firm the size of Schwab? The SIPC would sell off the good customer accounts to another brokerage firm, but what would the losses be on the bad accounts? Better hope we never have to find out.

 

[G-Boa]

Quote from jeb9999:

Let's look at just one brokerage firm. As of 03-31-2008 Charles Schwab had $1.393 trillion in customer assets. Yes, that is trillion with a "T". What would happen if the SIPC had to liquidate a firm the size of Schwab? The SIPC would sell off the good customer accounts to another brokerage firm, but what would the losses be on the bad accounts? Better hope we never have to find out.

wow, $1.393 trillion in customer assets. i wonder, but always stand to be corrected, whether all that is stocks and cash???

AND....i wonder to what degree SIPC would need to be liable (i.e. if you have 10000 accounts with OVER $400k worth of securities in it, SIPC only pays up to $400k for securities holdings and up to $100k if any cash in there - the rest is toast, see what i'm saying??) so an $8MM account would be obliterated.

i would guess it's safe to imagine $1.5b wouldn't cover everything in a total meltdown. how much would be needed?? i wonder if anyone on the planet knows??

as you said before, since it is a legal requirement for these firms to cover up to such and such amounts, the best you can do is assume you will be backed by the gov/FED if shit hits the fan, but only up to such and such amounts.

 

[jeb9999]

You are making invalid assumptions. A $8 MM account would not be obliterated.

Let's just say that a brokerage firm with $1.393 billion in customer assets goes under because $100 billion goes missing. 93% of the customer assets are still there. If the SIPC has the securities and/or cash that belong to your account you get them. The $500K only is paid for missing securities and the $100K only is paid for missing cash. The customer with the $8 MM account may even get a full recovery if all their securities are still at the broker, but they normally would expect about a 93% recovery of assets beyond the specified SIPC $500K coverage.