What happens if a stock broker goes bankrupt?

[chimpanchu]

Hi all, I'm a NSW resident who invested in international market through Commsec. Lately, I've been pondering over a question on my mind.

Hypothetically speaking, if Commsec close down (or bankrupt, which probably also means Commonwealth Bank also bankrupt). What will happen to all the international stocks which I own in their book entries?

 

[GumbyLearner]

Re: What happen if a Stock Broker go bankrupt?

Hi all, I'm a NSW resident who invested in international market through Commsec. Lately, I've been pondering over a question on my mind.

Hypothetically speaking, if Commsec close down (or bankrupt, which probably also means Commonwealth Bank also bankrupt). What will happen to all the international stocks which I own in their book entries?

Did you purchase with a margin loan?

 

[chimpanchu]

Re: What happen if a Stock Broker go bankrupt?

Did you purchase with a margin loan?

No, I purchased with my own cash.

 

[cornnfedd]

i take the view if commonwealth or commsec went broke then the whole financial system would be imploding on itself, therefore it probably wouldnt matter anyway - time to buy a gun.

But its a good question for some of the smaller share brokers though? Since you only use commsec to buy the shares I would assume if they went broke you still keep your shares anyway therefore you may only loose what you had in say a cash management account with them.

 

[chimpanchu]

i take the view if commonwealth or commsec went broke then the whole financial system would be imploding on itself, therefore it probably wouldnt matter anyway - time to buy a gun.

But its a good question for some of the smaller share brokers though? Since you only use commsec to buy the shares I would assume if they went broke you still keep your shares anyway therefore you may only loose what you had in say a cash management account with them.

What I mean is, if Commsec does go bust how do I keep my shares? I can't login to Commsec online and sell my shares can I, because there won't be anything to login to...

I guess what I like to know is, at the event of a broker bankruptcy how do investors get their shares OUT of their bankrupt broker!?

 

[BSD]

As long as the shares are not lodged in some weird collateral agreement - you will be fine.

The broker doesn't own your shares - they are not an asset of the broker.

You could always go 'issuer sponsored' for a complete admin pain in the backside.

But if you are still worried, you probably shouldn't be investing in shares.

 

[nomore4s]

What I mean is, if Commsec does go bust how do I keep my shares? I can't login to Commsec online and sell my shares can I, because there won't be anything to login to...

I guess what I like to know is, at the event of a broker bankruptcy how do investors get their shares OUT of their bankrupt broker!?

Just transfer them to another broker.

 

[cornnfedd]

What I mean is, if Commsec does go bust how do I keep my shares? I can't login to Commsec online and sell my shares can I, because there won't be anything to login to...

I guess what I like to know is, at the event of a broker bankruptcy how do investors get their shares OUT of their bankrupt broker!?

Even though you bought your shares through Commsec they do not hold them, if Commsec went broke it would make no difference, the shares are usually CHESS Sponsored, therefore Commsec buy/sell on your behalf but they never actually own the shares. try this link:

http://www.asx.com.au/products/shares/how/chess_faq.htm

If commsec go broke you can still log into Computer Share website and check what shares you have, Commsec could be deleted tomorrow and all your shares would still be listed on ComputerShare or Link Market Services.

I hope that makes sense.

 

[cutz]

Even though you bought your shares through Commsec they do not hold them, if Commsec went broke it would make no difference, the shares are usually CHESS Sponsored, therefore Commsec buy/see on your behalf but they never actually own the shares. try this link:

http://www.asx.com.au/products/shares/how/chess_faq.htm

If commsec go broke you can still log into Computer Share website and check what shares you have, Commsec could be deleted tomorrow and all your shares would still be listed on ComputerShare or Link Market Services.

I hope that makes sense.

Sure about that ??

I don't think international shares purchased through comsec are chess sponsored, another broker may actually be providing the service.

Best ring them up and find out.

 

[chimpanchu]

Sure about that ??

I don't think international shares purchased through comsec are chess sponsored, another broker may actually be providing the service.

Best ring them up and find out.

That's right international shares are NOT CHESS sponsored. International shares are weird ones, I'm not entire sure how the whole mechanic works.

 

[GumbyLearner]

That's right international shares are NOT CHESS sponsored. International shares are weird ones, I'm not entire sure how the whole mechanic works.

Well under Australian law you would be ok holding OZ shares without a margin loan.

As someone suggested before consult a lawyer. WTF would I know?

 

[chimpanchu]

Well under Australian law you would be ok holding OZ shares without a margin loan.

The shares I owned are not OZ shares, they are international shares I bought from NASDAQ and TSX and OTC.

 

[GumbyLearner]

The shares I owned are not OZ shares, they are international shares I bought from NASDAQ and TSX and OTC.

Oops. Sorry mate.

If I were you I would open your own super account and transfer them into your own name for anti-paranoid purposes. You will have to pay a duty to the Office of State Revenue to transfer the shares into your name/entity/trust etc.. , but don't worry they will be able to keep track of you and your stuff. And tax it!!

But again DYOR. WTF would I know?

 

[cutz]

The shares I owned are not OZ shares, they are international shares I bought from NASDAQ and TSX and OTC.

Do a bit of research,

Good place to start would be the Pershing Disclosure Statement you may or may not have signed (as have read) when you set up the account, only assuming this because it's standard procedure to read a PDS and sign that you have read it, also have a look at the FAQ's on the website.

As I said, don't know much about them but that's where I would start.