What happens to the money if broker goes broke during settlement period?

Discussion in 'Retail Brokers' started by learner88, Jan 30, 2018.

  1. Suppose I sell a stock today. Tomorrow, the broker announces it has gone bankrupt. Settlement takes 3 days to settle and cash from the sales has not come in. What happens to my money? Will I still receive it or should I just bite the bullet and write the money off?

    I am using Interactive Brokers who is a financially strong broker. Unlike to happen but I'm just being paranoid.
    Last edited: Jan 30, 2018
  2. tomorton


    If the broker has processed your sale today as they should have, I'm hoping you still get the money. The transaction was concluded before the bankruptcy, so the broker should not have lost out,so no legitimate reason not to pay you.
  3. Xela


    Tom, the OP's asking what happens if the broker goes under, not what happens if the company whose stock he sold goes under ... ;)

    I don't trade stocks, myself, but anyway I think the answer depends in general on the jurisdiction where the brokerage is registered and regulated, and specifically on whether your account's protected by any government-backed guarantee (as is the case in some countries). With IB, however, I think we can all agree that it's hardly "high risk"?
  4. tomorton


    Thanks Xela. Just slapping my forehead in exasperation.
  5. Occam


    I've experienced this. If the account is SIPC and/or supplementally insured and your account is within the limits, SIPC figures it out. What you actually get (in terms of securities positions vs. cash) coming out of it is messy. But the dollars and cents should add up, in the end -- at least they did for me.
  6. Thanks for the replies. HOpefully, it never happens.