If E-Trade goes bankrupt, are my mutual funds there safe?

Question

If there is a run on E-Trade or E-Trade goes bankrupt, are my mutual funds in a brokerage account there safe?

Can E-Trade's creditors take mutual fund or stock holdings from within it's brokerage customer's account in a bankruptcy proceeding?

Fact that everyone is mentioning insurance doesn't reassure me, because that implies a claim has to be filled out, and then wonder exactly how much of my original holdings will be paid out.

And if they are only acting as a holding intermediary holding my funds, can a creditor take them (seems like insurance is more designed to protect against someone inside the firm stealing money from client accounts)?

Answer 1

check their website for the protection they offer.

i'm sure they do provide protection and if you've got megabucks there, maybe you have a (small) worry.

Answer 2

I, too, have accounts with Etrade. I own mutual funds and stocks. Think about it this way....

You own a mutual fund in an Etrade account. You actually own the fund. Etrade is just the custodian for it. They are holding it for you. It's yours. If Etrade goes bankrupt. You still own those shares in the 3rd party mutual fund. Etrade cannot legally touch those shares, you own them.

I own Intel, Google, and Apple in my account. If etrade goes bankrupt, they legally cannot touch those shares. Those are mine.

It's no different than if you are keeping valuables in a safe deposit box at a bank... If the bank goes bankrupt, the creditors are not going to raid the safe deposit boxes.

On top of that, in bankruptcy proceedings, customer accounts have priority over creditors.

If Etrade goes belly up.... Some other company, probably Schwab or TD will buy up all the brokerage customers... Your account will be transfered.

Answer 3

I have five Etrade accounts and today's news rattled me also. However, FDIC insures bank deposits and SIPC protects shares up to $500k (w/ $100k being in cash). We are probably okay - even though it is a hassle to file the claim. Just be sure to keep all of your monthly statements for each account. Keep those records in 2 different places, if possible.

Chances that the company will disappear overnight is very low. They could either sell, merge or file chapter 11 - which is reorganiztion. Delta also filed Chapter 11 and still kept flying planes and doing business.

I think you probably should get out of Etrade CD's and funds - that's my opinion.

I sold Etrux, but am reinvesting the money in something else.

But besides that, I decided to stay put.

Answer 4

ummm.... obviously you didn't read that the analyst from citi said there is a 15% chance of etrade going bankrupt based on 5 billion in write offs. And clearly you know nothing about sipc insurance. Do your homework man!

Answer 5

E*Trade is the 8th largest securities company in the United States of America by Sales and they are not going anywhere.

I don't have $2,000,000,000.00 to buy the entire company but other foreign investors will buy it if the shares drop to $3.33 in the future.

Your brokerage account is insured by the SIPC (Securities Investor Protection Corporation) for $500,000.00

If you have more than $500,000.00 then you need to move some of your holdings to Zecco, TD Ameritrade or Charles Schwab.

Answer 6

ETF's, definite. ETN's, possibly no longer. ETF's are swimming pools of investment money break away the employer that manages the components. except fraud is in touch, you haven't any longer direct threat. If fraud, then the underlying fraud "coverage" -- info are not truly substantial right here -- will kick in. ETN's are swimming pools of investment money that are in some substantial approaches certain by using the employer issuing the notes -- underwriters threat. The capability of the employer controlling your components continually concerns, yet threat in those products isn't probably from now on than in mutual money and below hedge money.

Answer 7

Brokerage accounts are protected by SIPC. For their FAQ: http://www.sipc.org/who/sipc7questions.cfm

Safe is a relative term, you'll need to file a claim to get your money if they go belly up, good luck with that.

Answer 8

Someone posted a link below, and it answers your questions. The funds are federally insured; you will get your money back. The site said the timeframe is usually 1-3 months.

Answer 9

Your brokerage or IRA accounts are insured up to $ 500,000. your cash to $ 100,000.....but if they DO go out of business it will take you close to 3 months to get your money.

Answer 10

Thankyou everyone for answering