Segregated Assets

When a bankruptcy occurs, the bankrupt entity must repay its debts to creditors. The bankruptcy estate is the portion of the bankrupt entity’s assets that can be used to repay these debts.

Certain assets are excluded from the bankruptcy estate. These are called segregated assets. Segregated assets cannot be used to repay debts owed to creditors.

The term segregated assets is used in connection with custody accounts for securities, and for collective investment vehicles like mutual funds, retirement funds, and exchange-traded funds (ETFs).

In Switzerland, the term segregated asset is not an official designation. Instead of referring to segregated assets, various Swiss laws require securities to be segregated from the bankruptcy estate when a bankruptcy occurs. The Financial Institutions Act (FinlA), for example, states that “assets and rights belonging to the investment fund shall be segregated in favor of the investors.”

Konkret: Falls die Hausbank oder der Online-Broker Konkurs geht, fallen Wertschriften wie Aktien, Obligationen, Fonds und ETF nicht in die Konkursmasse. Die Wertschriften werden später dem Kunden ausgehändigt. Auch beim Konkurs eines Fondsanbieters oder einer Depotbank sind die Wertschriften nicht verloren.

The bottom line: If your bank or stock broker were to go bankrupt, your securities like bonds and shares in company stocks, mutual funds, and ETFs would not be included in the bankruptcy estate. Instead, your securities must be turned over to you at a later date. This also applies to bankruptcies of fund managers and custodian banks.

More on this topic:
Bank bankruptcies and depositor protection in Switzerland explained


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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.