What happens to a brokerage if it declares bankruptcy?

Discussion in 'Retail Brokers' started by mahram, Aug 10, 2005.

  1. I was wondering, what happens to US brokerage like a morgan stanley or goldman saks were ever to declare bankruptcy. What would happen to the accounts held by them?
  2. Truff


    They would probably be sold at a very cheap price
  3. Ebo


    Don't worry, your $5K will be insured under S.I.P.C.
  4. lol its ebo, glad to finally see you on the boards again, did you finally take your shower today, or another few days to go :D
  5. Ebo


    Thanks bro!
    I had my swim in the ocean already.
  6. Htrader

    Htrader Guest

    Firstly, a bulge bracket firm like Goldman would not be allowed to declare bankrupcy as it would destabilize the financial markets. Either the fed would bail them out, or another firm would take over the assets, like when ING took over the defunct Barings Bank. Either way your fund are safe.

    If a smaller brokerage does collapse, your funds are safe as long as the clearing firm is still intact.

    If your broker self-clears then you are at the mercy of the SIPC, whose rules are much more stringent than the FDIC when it comes to redemptions.
  7. John Muir collapsed in 1980 or 81 . Problem was, by the time they sorted out who owned what, the market had collapsed (it did it a lot back then. you know, metals, oil up big and......hey) and the clients coulldn't sell. They got crushed.

    They make you whole, but in time. Recent one was MJK Clearing. Largest SIPC failure to this date. Khosoghi and Deutsche Bank did them in. Maybe you can find out the procedure by researching that one.