What happens if an online broker goes bankrupt?

Question

Do people who have money with them get their money out? I'm not talking about the one who hold stock in the actual company - the ones who hold stock in other companies through them?

Answer 1

SIPC [Securities Investor Protection Corporation, i think] insures brokerage accounts, not FDIC mate.

otherwise, the first guy got it right, -- if E*Trade went down, the business and accounts would be sold to someone else and that firm would strive mightily to make sure you were taken care of.

limit of coverage for a brokerage account may well be much higher than 100,000 USD, btw. I think some brokers have purchased additional coverage from an insurance company and now protect all accounts up through 5 million.

Answer 2

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Answer 3

Brokerage accounts are insured by the Securities Investor Protection Corporation (SIPC), a private agency owned by all of the brokerage companies. When a brokerage company declares bankruptcy, SIPC takes over the assets of the broker and manages the bankruptcy (sort of like the FDIC). However, and this is important, this does not mean that your investments are insured against loss in value. It simply means that if you owned shares of XYZ corp, SIPC will make sure that you receive your shares. You should be contacted by SIPC if your broker files bankruptcy.

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Answer 4

Your stocks and funds are still yours. Chances are that another broker will buy those (your) holdings. In other words if etrade goes belly up then Schwab or TD Ameritrade or someone else will purchase etrades holdings. You still own that stock (or funds) - etrade is simply the holding company.

As for any cash that you might have in that account, it is FDIC insured up to $100,000 just like any other bank. It might take you a while to get that money, but you are insured by the government.

Answer 5

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RE :What happens if an online broker goes bankrupt?
Do people who have money with them get their money out? I'm not talking about the one who hold stock in the actual company - the ones who hold stock in other companies through them?
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