Online broker bankruptcy - what happens to stocks and money?

Here you will find the right answers

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  • BenutzernameMoneyland User Questions
  • Status Member
  • Registriert seit1/27/17
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What would happen to my securities if my online broker went bankrupt?

Would I lose some (or all) of my securities? Does the type of securities I have (stocks, bonds, etc.) make any difference?

What about money held in a broker account?

Thanks in advance for your answer.

 
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  • BenutzernameMoneyguru von moneyland.ch
  • OrtSchweiz
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  • Registriert seit8/4/15
  • Beiträge4017

Greetings,

What happens to your securities and deposits when a broker goes bankrupt depends primarily on whether you use a Swiss broker or a non-Swiss broker.

In the case of non-Swiss brokers, procedures will follow regulations which apply in the country where the broker is registered. With around 196 countries in the world, each with their own regulations, the possibilities are many. In the worst case you may suffer a total loss.

On the other hand, Swiss banks which are registered with supervisory authority FINMA maintain a three-tier system of protection for deposits. Money held by Swiss banks is covered, at least in part, by the Swiss depositor protection guarantee. You can find out more about what happens to your money when a Swiss bank fails in this guide to bank deposit protection in Switzerland.

Securities like stocks, ETFs, funds, bonds and many others are segregated from bank assets because the bank or broker simply acts as a custodian, while you retain full ownership. If a broker goes bankrupt, these securities are not affected, and are returned to investors. However, structured products and certain other investment vehicles may be affected if they are issued by the bankrupt bank.

If the Swiss broker you work with is not a licensed bank, your securities are held at a partnered custodian bank and not by the broker. Your money is also held in an account at a partner bank. In this case, you are only affected if the partnered bank fails. Your broker's bankruptcy will not affect your assets.

Best regards from Moneyguru

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