Still working on this, but a couple of things occurred to me.

I believe some mutual funds will hold an account for you, so you have
a registration in your name and bypass a broker. I'm not sure that
improves safety - it may reduce it.

The SIPC website would be a place to start digging into the specific
rules and regulations - they may have something there to indicate an
answer to your question - registration in your name as opposed to
street name (the name of the brokerage). The repeal of the Glass-
Steagall ACt (nine years ago) may not have affected rules for
segregation of accounts. A long time ago, I asked the question you
have asked about stock certificate registration, and as I recall the
explanation was that while the shares are registered with the
Registration Agent in the Broker's name, the Broker segregates those
shares into a Client Account, together with the cash, where all
transactions take place. So it is somewhat like having a checking
account at a bank - the bank keeps your funds in a Client Account.
(I'm not sure which is safer.) I hope that makes you feel a little bit
safer, but the real issue is knowing the facts, so that you know,
exactly, the regulatory mechanics and what might or might not happen.

There is a difference of course between the 500k SIPC Insurance on the
stock portion and the cash portion. Cash in excess will not be covered
(300k stocks, 200k cash = 400k SIPC coverage). In practice, I believe
the cash is usually returned first, and the shares weeks (or months)
later.

A question related that I don't believe you asked is what happens in a
margin account, and how that is different from a cash account. Some
transactions cannot be done in a cash account, but can be done in a
margin account. I asked (a long time ago) if shares in a margin
account were being loaned to short sellers - I didn't fully understand
the answer, but apparently they were not being loaned. The margin
account seems to me to be a bigger issue than the registration of
shares, although obviously if you hold the certs in a bank vault, they
can't be loaned.

There are companies who will hold your shares in your name, but will
not trade them for you. You have to request a transfer of those shares
to an entity (such as a broker) that will trade them for you.

There are also differences between the ways a Broker handles accounts,
and the way a Bank Owned Broker handles accounts.


- quote -


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<beliavsky[at]aol.com> wrote in message
news:2bfad736-fef5-489b-baf2-324911b19f7d[at]13g2000hsb.googlegroups.com...
- quote -


this doesn't ease my concerns. What if you have more than $500k and there
is misappropriation or negligence?

I think if your shares are held in "direct registration" by the issuing
corporation, there is less likelihood of misappropriation or negligence, but
still not a 100% assurance.


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding.

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On Mar 8, 8:20*pm, "Gil Faver" <rowdy'sb...[at]xxyz.com> wrote:
- quote -

I suggest you read an article in today's Wall Street Journal,

Amid Brokers' Woes, Investor Accounts Are Mostly Protected
By Jane J. Kim
March 18, 2008; Page D1

...

'Fortunately, the system of regulatory rules in place should protect
most investors.

"I really don't think it's that big a deal for retail customers," says
Adam Honore, a senior analyst at Aite Group LLC, a financial-services
research and advisory firm. "Crisis and liquidity have nothing to do
with whether you've got an IRA with Bear Stearns."

For one, brokerage firms are required to have enough assets on hand to
repay any customer obligations in the event of a bankruptcy. Moreover,
under the Securities and Exchange Commission's so-called customer-
protection rule, broker dealers are required to hold client assets in
"segregated accounts," which means the firm cannot use those assets
for their own business purposes.

To the extent that the firm doesn't have the funds and securities to
cover those claims -- either because of misappropriation or negligence
-- the Securities Investor Protection Corp. will step in to cover
losses up to $500,000 per account, including $100,000 for claims for
cash. Beyond the SIPC coverage, some brokerage firms may offer
additional insurance.

Investors worried about their brokerage firm should verify that it has
SIPC coverage and determine what the firm's excess coverage might be,
says Steven Caruso, a partner at Maddox Hargett & Caruso PC, a New
York law firm. Investors with accounts that exceed those limits could
be at risk of losing their money, he says.'

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"dapperdobbs" <GeorgeCFL[at]hotmail.com> wrote in message
news:ca76e3fa-7c22-41f7-9d7d-3617c298484b[at]m3g2000hsc.googlegroups.com...
- quote -

Ok, well then I won't keep you in suspense!

Here is my understanding:

1. brokers are supposed to keep your securities segregated from their
assets, so if they go belly up, that means all your securities are still
there for you.

1a. somebody (SEC??) audits the brokers to make sure they are doing this.
1.b the broker makes periodic reports showing they are doing this.

Q1: how do we really know this is happening, or will "stay" happening when
the broker starts gasping for air?

2. during the hiatus between the time you execute and order and the (soon to
be "your") securities are segregated from the broker's assets, they are at
risk.

Q2: how long is this hiatus? I think this does not equate to the period
required for you to settle your account, but is likely some additional time
required for the broker to push paper/bytes around.

3. In the event a broker goes under, your cash is SIPC protected to $100k.
Above that, cash may be protected by "excess SIPC" insurance, to a maximum
amount per account, and a maximum aggregate account. And, as you point out,
what is the strength of the insurer?

4. In the event a broker goes under, your securities are SIPC protected to
$500k (less any SIPC cash protection). Of course, if all your securities
are properly segregated, they are still there for you. If not, or you have
securities in the hiatus period, you will be looking to SIPC for protection.

Q4. Are securities borrowed from your account to accommodate short sellers
still segregated for you??

5. In the event a broker goes under, you securities losses above $500k (less
SIPC cash protection) may be covered by "excess SIPC protection". This has
a limit per account, and an aggregate limit. I note that E-Trade's
aggregate limit is $600M, which sounds like a lot, but I wonder. they have
a lot of accounts, and a lot of customer securities.

Q5. Uh, what was my original question??

oh, I guess I wonder if there is a way to ensure that "my" securities are
properly segregated. If they are held in street name, I suppose you are at
the mercy of the broker (and the auditors) to see that this is true. But,
if you can have your securities held at a broker held by you via "direct
registration", segregation seems assured. So, are my shares held at a
broker held in my name via "direct registration"? If not, can I request the
broker do so? Would this necessarily require paper certificates sent to and
held by me (I prefer not to do this)?

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On Mar 8, 7:20*pm, "Gil Faver" <rowdy'sb...[at]xxyz.com> wrote:
[snip]
- quote -

securities in your account. Each broker is watched to ensure
compliance with rules I have never seen, but the gist of which I
understand is to make sure the broker does not compromise the
positions held in client accounts. I think the excess protection
covers cash balances, and is often in excess of $5 million.

So, if you have cash balances that exceed the excess insurance, you
might consider opening an account at another brokerage. Note that the
source of the insurance should be something you look at, as well, and
that there will be a delay in delivery in the event of broker
bankruptcy. Usually the cash comes first, then the securities
ownership has to be sorted out.

Your best insurance is to look at the financial statements of the
brokerage, or read some analysts' reviews, to get a sense of the
financial strength of the institution - not unlike checking out the
safety of a bank. Banks have a tendency to treat their (subsidiary)
brokerage accounts like second class citizens, without either
insurance or the banks guarantee.

Looking forward to seeing if I again misunderstood your question :-)

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SIPC coverage is only $500k ($100k max for cash).

Many brokers have "excess SIPC coverage", but that has its own per account
and aggregate limits.

at what point would you use multiple broker accounts to improve your
insurance coverage?

Is it possible for brokers to hold your securities in "direct registration",
or does that mean they will not be reflected on your broker statement?

what else should I be asking here??

thanks.

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