How safe are brokerage firms

Discussion in 'Retail Brokers' started by yabz, Jul 17, 2003.

  1. yabz


    I have an a/c with IB and also Firstrade. How safe are these accounts? What would happen is the firms went bust? :eek: What about fraud? :mad:

    What protection do investors have?

  2. Kap


    Good question, there is some protection in the U.K for such a situation following a couple of rogues who took on huge over margined positions and lost BIG, wiping all the other clients out and the firm... scary stuff.. I try to keep my excess to margin requirements as minimal as possible for such an event, even though historically has been a rare occurence. I stick with the long established firms only.
  3. H2O


  4. Sawat dee Krap.

    All acounts are Sipc Insured with broker-dealers.
    If your B.D go bankrupt or busted.
    Frud that results from thier employees are cover
    You have to protect your data and mails from hackers
    if you have very big acount.

    Some Big firms like Ameritrade (Datek) send money to
    the bank the received transer from, or the bank that
    you mentioned in your agreement, only.
    You also have to send them letters from your bank stating
    that you hold account with them, and fax this letter to
    them, with you signture on you wire request always.

    I need to do all of this as forigner living in foreign country
    to withdraw my $46,000 with them.
  5. TGregg


    First you send the money, then you wonder if it's safe? I suspect you have your priorities reversed. Fortunately for you, IB is pretty safe (and probably Firstrade, but I never checked them out). From IB's website:

    Securities Account Protection

    Your total securities account equity protection is $10 million, of which $1 million is for cash protection. The first $500,000 of protection is provided by the Securities Investor Protection Corporation (SIPC), of which up to $100,000 protects cash. Travelers Casualty and Surety Company of America (Travelers) provides the remaining $9.5 million protection, of which $900,000 protects cash.

    SIPC and Travelers provide protection against losses of securities, equity options and cash due to the financial failure of a broker-dealer. They do not protect against market depreciation, the fluctuation in market value of your securities or trading losses.

    In the future, I strongly advise you to determine the answer to that question before you send in your money.
  6. SIPC is kind of a joke though.....SIPC doesn't really pay out or insure anymore...what usually happens is , say for example , IB did go under and was in net cap and done: SIPC would begin taking 'offers' from firms who want to buy the accounts and convert them.....A couple years ago MJK went under because of a bad problem, SWS bid about 2 million and took about 75 different broker dealers under it's wing in one big conversion.
  7. maxpi


    Yup, but when you do a wire transfer you agree that if the money does not get to your account you are responsible without recourse!!

  8. def

    def Sponsor

    I'm on holiday (sawat dee krap is appropriate) so I may not reply for a while if a question is asked but I need to state that the above statement is not true. All registered and licensed securities brokers are SIPC insured. Future brokers are not and if I'm not mistaken, do not carry supplemental insurance as well. Even with SIPC it might take a long time to get funds returned.
  9. yabz


    I believe that IB trades on its own a/c and this is one of their main sources of income :confused:

    Now, one thing I have learned about trading is that its possible to lose a hell of a lot of money doing it, and if its the case that 'SIPC is kind of a joke' that seems quite worrying :eek:
  10. def

    def Sponsor

    A unit of IB, called Timber Hill are large market makers and proprietary traders around the world. However, all Timber Hill funds are completely segregated from brokerage accounts. For more information on Timber Hill, read the S&P report which gives it an investment grade rating on the IB web site.

    IB's broker unit financial statements are available as well. Do your own homework and make an educated decision.
    #10     Jul 29, 2003