IB are foreign stock holders covered by SIPC

Discussion in 'Retail Brokers' started by maxwellreid, May 14, 2008.

  1. I buy Australian stocks thru IB, my account is in AUD, I reside in Australia. The question is am I SIPC covered for my holdings and cash, in the event IB goes belly up.
  2. no answer, so i guess i am not covered. Is there a way of using IB so that I am covered? And how simple is it to have a withdrawal system to a bank, via the internet. ie so that i can do a sweep of surplus cash out of IB into a internet based bank?
  3. Daal


    I believe this applies to all clients
  4. cvds16


    All accounts are covered
  5. i have some doubts that SIPC was designed for covering external (to the US) traders, perhaps trading thru a subsidary of IB. This is something that may only clear itself up after a belly flop. What I expected was that stock bought would be kept in a nominee account and not available to anyone except the holder. Not sure this happens at IB??? Is there a definitive answer? I doubt it. Most Oz stock bought goes under the CHESS system and the broker has limited access to it. IB are not using the CHESS system, so who's name is the stock in?
  6. Cutten


    At IB, stock is in street name IIRC, so if the record-keeping system melts down (e.g. under a terrorist or state-sponsored cyber-attack), you are potentially screwed.

    Do not hold all your assets at IB, or any broker for that matter. Even though I think IB has the best risk-management and soundness of any broker, it's not worth taking the punt. I have a maximum of 50% of my assets at any one firm.

    IMO the best thing to do is diversify. Have your long-term investments at one low-cost broker (you don't need bells & whistles for that) and insist on paper certificates. Have any active trading account at another broker (e.g. IB), and be cool with street name since it suits active trading far better and reduces your commissions costs. Have your pension at yet another institution etc, again make sure it's in your own name with certificates. Own your own home/land. That way it would take financial armageddon to wipe you out. Having all your financial assets in once place is asking for trouble.

    One great way to reduce risk is to have an offset mortgage, and place your cash savings there. That way if the firm goes broke, you still have a house free & clear. If the firm can keep charging mortgage payments, then by definition they know your savings are there too. And if they can't, then hey presto - you own your home free & clear.

    Also remember that if a firm goes bust, SIPC can take years to pay out in the worst case. During such a crisis, equities will undoubtedly go to bargain levels, so you'll lose twofold. Make sure you have a second account at a firm backed by a huge "too big to fail" financial institution.
  7. SIPC covers "missing cash and securities" from customer accounts of an insured firm.
  8. thanks cutten. In Australia there are margin lenders going bust and it turns out they were using traders/investors stock and cash as collateral. They look like they will lose the lot. Google Opes Prime.

    I would like to know if IB is using the stock and cash as collateral, in any way.