How safe is it to have a brokerage hold your securities in street name?
July 14, 2004 7:21 AM Subscribe
How safe is it to have a brokerage hold your securities in street name?
My dad, who's fluent in lawyer, took a look at my online broker's terms and conditions agreement and found it to be extremely one sided (in favor of the brokerage). I suppose this is to be expected. But some of the conditions are giving me cause to reconsider the value of my beloved convenience. For example, if I have a debit balance of any size (big or small), the brokerage has the right to loan out everything in my account without my consent. I can understand them loaning out an amount equivalent to my balance owed, but everything? Seems a bit extreme.
So my questions, in addition to the above, are What happens to my holdings if the broker happens to go belly up? Is it measurably safer to have the certificates issued in my name and hold onto them myself (white knuckled in the darkest corner of my basement)? And do the terms and conditions vary at all between brokers, or are they fairly standard across the industry?
My dad, who's fluent in lawyer, took a look at my online broker's terms and conditions agreement and found it to be extremely one sided (in favor of the brokerage). I suppose this is to be expected. But some of the conditions are giving me cause to reconsider the value of my beloved convenience. For example, if I have a debit balance of any size (big or small), the brokerage has the right to loan out everything in my account without my consent. I can understand them loaning out an amount equivalent to my balance owed, but everything? Seems a bit extreme.
So my questions, in addition to the above, are What happens to my holdings if the broker happens to go belly up? Is it measurably safer to have the certificates issued in my name and hold onto them myself (white knuckled in the darkest corner of my basement)? And do the terms and conditions vary at all between brokers, or are they fairly standard across the industry?
crumbly: All brokerages should have insurance to cover the assets they hold for their clients. See SIPC for example. It's somewhat like the FDIC and your bank account.
posted by reverendX at 7:30 AM on July 14, 2004
posted by reverendX at 7:30 AM on July 14, 2004
Response by poster: reverendX, I hadn't known about SIPC. Thanks for the info.
trharlan, I've been thinking about moving to a new broker and Fidelity is my first choice. But just out of curiosity, what is it about Schwab that makes you uncomfortable?
posted by crumbly at 9:39 AM on July 14, 2004
trharlan, I've been thinking about moving to a new broker and Fidelity is my first choice. But just out of curiosity, what is it about Schwab that makes you uncomfortable?
posted by crumbly at 9:39 AM on July 14, 2004
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Stick with a wll known broker like Shcwab and you shouldn't have to worry about them going belly up.
posted by bondcliff at 7:29 AM on July 14, 2004