Etrade going bankrupt ...
... would be a really bad things for their shareholders. They seem to be in pretty bad shape if you read this article from Forbes. The question that I've got though is what would happen to their customer accounts if they went bankrupt. I know that the actual official ownership documents are held by a third party in Canada (I assume the same is true in the USA). Does anybody have an idea of possible outcomes in this scenario?
1 comments:
The clients' accounts would be taken over by another brokerage, and the clients would have the option of using the new brokerage company or transferring to another institution.
A trustee is named for the bankruptcy, the investor gets a statement from the trustee which specifies their holdings on the date of bankruptcy.
If the assets cannot be delivered, or a portion thereof, the investor gets the cash value of the investment as of the date of bankruptcy. Investors are covered for up to $1 million per separate account - but it's not as cut and dried as you think. They have special definitions as to what constitute separate accounts.
All this is covered by the CIPF - Canadian Investor Protection Fund - which most IDA firms belong to.
Fees are paid by the dealers, not the investor - although one could consider that the expense of paying the fee is absorbed through standard brokerage fees. So in the end you are paying the fees - just not directly.
CompCorp is the same deal for insurance policies - $1 million coverage I believe too.
It's very well regulated - and more so these days. All financial institutions need to report certain operating ratios and stick to them or be fined heavily.
CIPF's website for more info
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