Page four of the booklet "How SIPC Protects You" says, "Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered.
There is an axiom that must be remembered under today's strange financial circumstances with top financial management by sociopaths.
The guarantee is no better than the guarantor. Hi Jim,
Regarding Jeff Berwick's article, "Who Really Owns Your Gold Stocks?," it is important for JSMineset readers to understand the limitations of SIPC protection. Page four of the booklet "How SIPC Protects You" says, "Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered."
I asked SIPC specifically if securities held in "street name" are considered to be registered in the name of the customer and thus eligible for complete protection. SIPC replied:
"In a liquidation proceeding under the Securities Investor Protection Act ("SIPA"), customers of a failed brokerage firm first get back all securities that are already registered in their name or are in the process of being registered, these are called "customer name securities." Customer name securities are negotiable only by the registered owner.
Securities held in "street name" are not considered customer name securities. In a SIPA liquidation proceeding, after the return of customer name securities, the remaining customer assets make up the "fund of customer property." The fund of customer property includes all customer securities held in "street name." The fund of customer property is divided on a pro rata basis with funds shared in proportion to the size of claims. If securities are still missing after the pro rata distribution, the customer would then be entitled to the coverage provided by SIPC, up to the statutory limit."
The SIPC brochure is available for download here: http://www.sipc.org/how/brochure.cfm
I could elaborate on discussions I had with SIPC, which raised additional red flags, but the above should be enough to encourage anyone who is serious about protecting him or herself to take action.
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4 comments:
SIPC (In)significant investor protection clause
Can anyone here think of a small and better situated US-based broker that: 1) keeps customer securities in the street name of said small broker, and 2) isn't involved in any business other than "boring," generic commissions transactions?
I can think of one that fits #2: Pennaluna. But they still have all their back-office clearing and street-name listing of securities running through NFS. While Fidelity (owns NFS) is certainly better than, say, the lunatics at JP Morgan, even Fidelity can be squashed by counter-party failure.
Pennaluna's view of itself can be seen here:
www.pennaluna.com/wp-content/uploads/Safety-of-accounts-Tuthill-Ltrs-122011%281%29.pdf
I like Pennaluna. I have an account there. But I still would like to learn if anyone here has found a brokerage that covers my #1 and #2 above. Thoughts?
And yeah, yeah, I know... physical metals, in hand, etc. I get it. Understand that "fortunately," I'm at a level of wealth that I need and want diversification and I have chosen to continue to participate in ownership of common stocks (especially mining shares). I would love to find a parking spot for a smaller percentage of my wealth that moves in and out of Jr. mining companies. Trying to manage a 50 position portfolio of said buggers with periodic trades makes getting holdings in the transfer agents name hard to do (and with some companies, not possible).
Try GDX and GDXJ, the ETFs for senior and (J)unior mining stocks. While I exited paper a month ago, these appear to have an appeal to those who want exposure to the gold mining stocks. There are ETFs for silver miners as well as those for Platinum
I have also owned some juniors as a separate investment. Those can be tricky since they are volatile and can take years to perform. That's about all I can offer in advice. David Skarica has a decent advisory service as well.
Thanks AXGIIK,
I'm a stock picker - a securities analyst and semi-retired fund manager. I like rolling up my sleeves and finding the 10 baggers and I've done well. So, while the ETFs have their place, I don't use them that much.
GDXJ, for what it's worth, isn't designed very well. The selected companies are a total mish-mash and not all of them are true Jr. mining companies. GDX more properly fits it's mission, however. I don't mind that ETF. I sometimes use it to hedge other holdings.
Thanks again.
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