NA Investment firms NA

[Let'sgoflying!]

Just trying to figure out how they work (in the unlikely event....).
So if eg. Edward Jones goes under, or if one of their employees goes nuts .... and they have bought various investment vehicles at your direction over the years -- can all your stocks, bonds, annuities, cd's, cash... disappear? Or does it depend on what you own?

Similarily, if you send an I.f. some cash, tell them to buy stocks for you, do you truly own the stocks?

 

[astanley]

In short -- depends on what sort of products you were purchasing. If you had them purchase registered securities directly on your behalf, then they have to hold them seperately than assets that may be seized/claimed by creditors upon dissolution of the company. If you bought certain proprietary products that are, in essence, playing with house money, you are probably out of luck if the firm goes up.

Note that this advice is extremely generic and doesn't apply to volatility/price-action related losses, nor losses-on-margin, or even derivatives contracts (for which I can't remember what the segregation of client funds rules are, since many banks provide market-making services for those people who trade in derivatives and options).

Cheers,

-Andrew

 

[wabower]

You own the stocks, but the certificates are typically not issued but instead held in house account name. If you invest in a mutual fund that holds stocks, you own shares in the fund but don't directly own the stocks--hence the name.

Just trying to figure out how they work (in the unlikely event....).
So if eg. Edward Jones goes under, or if one of their employees goes nuts .... and they have bought various investment vehicles at your direction over the years -- can all your stocks, bonds, annuities, cd's, cash... disappear? Or does it depend on what you own?

Similarily, if you send an I.f. some cash, tell them to buy stocks for you, do you truly own the stocks?

 

[wsuffa]

Just trying to figure out how they work (in the unlikely event....).
So if eg. Edward Jones goes under, or if one of their employees goes nuts .... and they have bought various investment vehicles at your direction over the years -- can all your stocks, bonds, annuities, cd's, cash... disappear? Or does it depend on what you own?

Similarily, if you send an I.f. some cash, tell them to buy stocks for you, do you truly own the stocks?

Andrew and Wayne are both right. As long as it's not a highly proprietary product, there shouldn't be a problem.

individual Stocks (and bonds) are usually held in the name of the borkerage to your account to facilitate trading. Yes, you still own them (except a mutual fund in which you own shares in the fund, not individual stocks) - and most brokerages can issue you certificates instead of holding them electronically in street name. Shareholder communications come from the brokerage, not the company/transfer agent.

There are insurance schemes (like SPIC - which acts the same way FDIC does on bank accounts) to protect individual shareholders in case a firm goes T.U.

As Andrew notes, there are exceptions for certain products.

Also note that "private equity" type investments sponsored by the firm are not generally protected (as Bernie Madoff's clients found out...)