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Hi!

Let's assume I have an IRA thru an Investment Firm/Brokerage (not Fidelity or Vanguard). Let's further assume the IRA contains 3 Funds:
1) A Fidelity S&P 500 Index Fund
2) A Vanguard S&P 500 Index Fund
3) A Money Market Fund (from the Investment Firm/Brokerage)

If the Investment Firm goes bankrupt, what happens to my money?

Thanks,
...Jerry

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Svap,

Must be something wrong with your hyperlink... it just redirects me to Google, with no search terms.

...Jerry

I was concerned about the same question, does anyone know how likely is smith barney going bankruptcy?

SIPC

amendegw said: Svap,

Must be something wrong with your hyperlink... it just redirects me to Google, with no search terms.

...Jerry


I think Svap may have been hinting at something.....

I am sorry, please type in search box “If the Investment Firm goes bankrupt, what happens to my money?”

One of resulst: Is My Money Still Safe?

"...What happens to my brokerage account if my firm goes bankrupt? Brokerage firms must follow strict rules about segregating customers' investments from the firm's money, so your accounts should remain intact even if the brokerage goes under and another firm takes over its business. For example, stocks, bonds and mutual funds are physically held by an independent depository, not the brokerage firm.

What if the firm misappropriated my assets? You have another layer of protection in case the firm hasn't followed all of the rules: The Securities Investor Protection Corp. covers stocks, bonds and other assets held at a brokerage firm that goes bust, and nearly every brokerage firm registered with the Securities and Exchange Commission must be a member. "We get involved only when a firm has used up its capital and has misappropriated customers' securities," says Stephen Harbeck, president and chief executive of SIPC.

If a brokerage firm fails, SIPC first tries to transfer the investors' securities to another firm. If that doesn't work, it then attempts to rebuild the investors' portfolios, even buying new stocks or bonds to make up for any missing shares. If the investments aren't available, SIPC will give you cash based on their value when the brokerage failed.

How much does SIPC cover? SIPC first returns your share of the broker's remaining assets, then uses its own funds (up to $500,000 per account, including a $100,000 limit on cash) to buy the same shares that you originally owned.

What happens if I have more than $500,000 at that brokerage firm? The $500,000 limit applies only to the maximum amount of its own money SIPC will spend to make up for any missing securities, not the total amount of money you can get back. If the customers' assets remain largely intact at the brokerage firm, then you can get back a lot more than that SIPC limit, which is a key difference between how SIPC protects brokerage customers and how the FDIC covers bank depositors.

In the 38-year history of SIPC, only 349 people have not received the full value of their accounts from their share of the firm's assets plus SIPC coverage -- and most of those instances occurred three decades ago or more.

If an investor's losses exceed SIPC's limits, the difference is usually covered by the broker's supplemental insurance -- often provided by Lloyd's of London or a new firm called Capco, the Customer Asset Protection Co. Capco provides coverage above SIPC limits to 15 major brokerage firms, including Goldman Sachs, Morgan Stanley, Raymond James and Wachovia Securities.

Do I have access to my money after SIPC takes over? That's the most common problem. It tends to take from one week to two or three months to regain control of your account while SIPC sorts everything out. It can take even longer if the brokerage firm kept shoddy records or was involved in fraud. SIPC does not protect against market losses while your account is in limbo.

For more information about how SIPC works, and to make sure your brokerage firm is a member, go to the SIPC Web site..."

I work for citi institutional consulting which is inside smith barney branches sometimes. There is zero chance of it going down. it is one of the more profitable parts of citi which is rare these days

niktobos said: amendegw said: Svap,

Must be something wrong with your hyperlink... it just redirects me to Google, with no search terms.

...Jerry


I think Svap may have been hinting at something.....


I made a 30 minute trip to Google before posting here. Couldn't find the answer. If someone knows what search terms I should use for Google, I'd love to know.

amendegw said: niktobos said: amendegw said: Svap,

Must be something wrong with your hyperlink... it just redirects me to Google, with no search terms.

...Jerry


I think Svap may have been hinting at something.....


I made a 30 minute trip to Google before posting here. Couldn't find the answer. If someone knows what search terms I should use for Google, I'd love to know.


Try this

amendegw said: niktobos said: amendegw said: Svap,

Must be something wrong with your hyperlink... it just redirects me to Google, with no search terms.

...Jerry


I think Svap may have been hinting at something.....


I made a 30 minute trip to Google before posting here. Couldn't find the answer. If someone knows what search terms I should use for Google, I'd love to know.



My Google is better...
Cut and paste you question, clicked and on second page – article on www.kiplinger.com

But niktobos's better

svap said: "...What happens to my brokerage account if my firm goes bankrupt? Brokerage firms must follow strict rules about segregating customers' investments from the firm's money, so your accounts should remain intact even if the brokerage goes under and another firm takes over its business. For example, stocks, bonds and mutual funds are physically held by an independent depository, not the brokerage firm"Bingo! And thanks!

svap said: "What if the firm misappropriated my assets?"
Maybe I'm naive, but I'm not terribly worried about investing thru a major Brokerage Firm and having them misappropriate a major S&P Index Fund.

Companies like Vanguard won't go bankrupt. the Funds own vanguard, not the other way around.

kloakndaggers said: I work for citi institutional consulting which is inside smith barney branches sometimes. There is zero chance of it going down. it is one of the more profitable parts of citi which is rare these days

Good to hear that, thanks.

Do you have two different S&P 500 funds because investing all your eggs in one basket is too risky?

BrlDsguise said: Do you have two different S&P 500 funds because investing all your eggs in one basket is too risky?

I was thinking the same thing. Why not just start an IRA at Fidelity or Vanguard, and then also invest in the MMA. Rather than paying any sort of fees to purchase the funds, just get them directly from the source.

1. Cash in deposit is totally different than assets other than cash. FDIC might / might not cover cash or as-good-as-cash. This would typically limited (until recently, it was 250K per IRA, but a lot has changed, and I have not kept up). So you simply check if the cash / cash sweep / other vehicle is FDIC insured or not.

2. Assets of customers must be segregates from banks own assets. In the past, that meant storing customer assets (like stock certificates) in separate safes / boxes / rooms. In the present, in practice this means your assets are held at a custodian bank different than the IRA custodian aka your brokerage (unless your name is Madoff). This is typically Bank of New York Mellon or something obscure like that. In this case, the brokerage going down might not affect you at all.

Of course there is alwasy fraud, or some other event accompanied with BK.

3. If your brokerage firm commits fraud, i.e., gives you confirms and statements that say you own $1M of XYX fund or ABC stock, but in fact they simply took your money, then SIPC kicks in.

Of course, you still must ensure that the brokerage has SIPC insurance. That's easy: ask them, and then validate with SIPC (just like FDIC).

SIPC insurance is Limited Too.

BrlDsguise said: Do you have two different S&P 500 funds because investing all your eggs in one basket is too risky? Nope, it was merely a hypothetical question. I just wanted to cover the situation where the Mutual Funds held where managed by firms other than the Brokerage that held the IRA. Probably could have used one S&P fund only - the answer seems to be the same.



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