What happens to holdings if a retail broker goes belly-up?

kmiklas

kmiklas

A brokerage is charged with cooking the books, and goes belly-up. They're insolvent. What happens to the holdings of their customers?

I'd imagine that there are different rules for different brokerages, but a few examples:

1. A USD100k in a US Treasury bond
2. 200 shares of IBM
3. Options
4. Futures
5. Forex

Thanks, Keith :^)
 
kmiklas said:
A brokerage is charged with cooking the books, and goes belly-up. They're insolvent. What happens to the holdings of their customers?

I'd imagine that there are different rules for different brokerages, but a few examples:

1. A USD100k in a US Treasury bond
2. 200 shares of IBM
3. Options
4. Futures
5. Forex

Thanks, Keith :^)
More...
You hope that many other brokerages go belly up, in which case the government will bail you out.
 
VicBee said:
You hope that many other brokerages go belly up, in which case the government will bail you out.
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But... if I own a US Treasury bond... then I own it!

Even if the broker goes belly-up, I still own the bond, right?
 
in the interest of self perservation, other brokerage firms will take over and equity investors will be wiped out. this works everytime. customers are not affected much.
 
kmiklas said:
A brokerage is charged with cooking the books, and goes belly-up. They're insolvent. What happens to the holdings of their customers?

I'd imagine that there are different rules for different brokerages, but a few examples:

1. A USD100k in a US Treasury bond
2. 200 shares of IBM
3. Options
4. Futures
5. Forex

Thanks, Keith :^)
More...

Assuming the brokerage is located in the USA, as long as the brokerage is a member of the SIPC, all of the securities above except Futures (unless it's held in a special portfolio margining account) and Forex are 100% protected up to a limit of $500K which includes $250K for cash.

https://www.sipc.org/for-investors/what-sipc-protects
 
I would suggest you look at these for the official answer. https://www.sipc.org/for-investors/. In the past, all customer accounts were moved to another broker, very quickly.

kmiklas said:
A brokerage is charged with cooking the books, and goes belly-up. They're insolvent. What happens to the holdings of their customers?

I'd imagine that there are different rules for different brokerages, but a few examples:

1. A USD100k in a US Treasury bond
2. 200 shares of IBM
3. Options
4. Futures
5. Forex

Thanks, Keith :^)
More...
 
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