3 ms·

If you use your bank account brokerage to buy stocks, what happen to the stocks if the bank goes bankrupt like this?

dshanahan 4y ago
Very likely completely safe, as equities are typically held in your name.
antondd 4y ago
Your stocks will be safe. The bank does not buy or sell stocks itself; this is handled by a stock broker that does trading on bank’s behalf.
helloworld 4y ago
"SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash." https://www.sipc.org/for-investors/what-sipc-protects https://www.sipc.org/for-investors/what-sipc-protects
- dehrmann 4y ago
  > $500,000 That's way too low. The other thing this exposed is that FDIC protection for businesses is also too low.
  - hotpotamus 4y ago
    If you want the government to backstop every single risk for businesses and investors, then prepare to pay a lot more in taxes.
    - dehrmann 4y ago
      Making the leap from ensuring money saved in safe, heavily regulated entities to "backstopping every single risk" is disingenuous. There are risks businesses should have to think about. Safety of money in their bank isn't one of them.
      - hotpotamus 4y ago
        Why shouldn't they have to worry? FDIC insurance limits are hardly uncommon knowledge. I have more than $250K dollars and I certainly worry about how best to manage it.
  - sneak 4y ago
    It probably hasn't been recently (or ever) inflation-adjusted since it was set. There are a lot of limits and thresholds like this that could use regular (or even extant) reindexing. EDIT: it was increased to 250k in 2008 or 2010. As you note this is too low. It seems like it has been rather low its whole history. Given that our inflation rates are basically halving the currency every decade or so, it should be reindexed much more frequently (and also raised in any terms).
  - Salgat 4y ago
    Businesses are able to buy insurance on top of what FDIC provides. It's only too low if you're foolish enough not to buy additional insurance if needed.
  - piyh 4y ago
    It's a per bank amount. If you're floating 300k in cash as an average person, split it between institutions.
kiltedpanda 4y ago
Insured up to $1m CAD in Canada through the CIPF. One thing I came across to watch out for though is that if you hold fixed income securities (e.g. GICs) that are issued by the same bank as the brokerage account, then if it goes bust, the securities are NOT covered by insurance. "CIPF does not cover: the insolvency or default of the company or organization that issued your security" For example, if you hold a $500k GIC issued by TD Bank in a self directed TD brokerage account, and TD goes bust, then you're gonna have a bad day.
Gustomaximus 4y ago
Country dependent answers here. In Australia most trade accounts use 'Chess' system which basically means when they buy shares they buy them in the account holders name so you own them and if the broker collapses it's not a problem. In US I believe they are generally owned in the brokers name but using 'SPIC' so you have $500k protection coverage similar to bank deposit protection.

Very likely completely safe, as equities are typically held in your name.

Your stocks will be safe. The bank does not buy or sell stocks itself; this is handled by a stock broker that does trading on bank’s behalf.

helloworld 4y ago

"SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash." https://www.sipc.org/for-investors/what-sipc-protects https://www.sipc.org/for-investors/what-sipc-protects

dehrmann 4y ago
> $500,000 That's way too low. The other thing this exposed is that FDIC protection for businesses is also too low.
- hotpotamus 4y ago
  If you want the government to backstop every single risk for businesses and investors, then prepare to pay a lot more in taxes.
  - dehrmann 4y ago
    Making the leap from ensuring money saved in safe, heavily regulated entities to "backstopping every single risk" is disingenuous. There are risks businesses should have to think about. Safety of money in their bank isn't one of them.
    - hotpotamus 4y ago
      Why shouldn't they have to worry? FDIC insurance limits are hardly uncommon knowledge. I have more than $250K dollars and I certainly worry about how best to manage it.
- sneak 4y ago
  It probably hasn't been recently (or ever) inflation-adjusted since it was set. There are a lot of limits and thresholds like this that could use regular (or even extant) reindexing. EDIT: it was increased to 250k in 2008 or 2010. As you note this is too low. It seems like it has been rather low its whole history. Given that our inflation rates are basically halving the currency every decade or so, it should be reindexed much more frequently (and also raised in any terms).
- Salgat 4y ago
  Businesses are able to buy insurance on top of what FDIC provides. It's only too low if you're foolish enough not to buy additional insurance if needed.
- piyh 4y ago
  It's a per bank amount. If you're floating 300k in cash as an average person, split it between institutions.

kiltedpanda 4y ago

Insured up to $1m CAD in Canada through the CIPF. One thing I came across to watch out for though is that if you hold fixed income securities (e.g. GICs) that are issued by the same bank as the brokerage account, then if it goes bust, the securities are NOT covered by insurance. "CIPF does not cover: the insolvency or default of the company or organization that issued your security" For example, if you hold a $500k GIC issued by TD Bank in a self directed TD brokerage account, and TD goes bust, then you're gonna have a bad day.

Gustomaximus 4y ago

Country dependent answers here. In Australia most trade accounts use 'Chess' system which basically means when they buy shares they buy them in the account holders name so you own them and if the broker collapses it's not a problem. In US I believe they are generally owned in the brokers name but using 'SPIC' so you have $500k protection coverage similar to bank deposit protection.