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Stock Broker Bankruptcy: What happens to my stocks and cash?

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  1. #1

    Join Date
    Mar 2013
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    12

    Stock Broker Bankruptcy: What happens to my stocks and cash?

    After watching all the news about Cyprus, I wanted to know how safe my stocks and cash in HK would be should my broker go bankrupt.

    My broker said that my stocks were kept with a custodian bank and in the event they or the custodian went bankrupt, I'd be protected by the Investor Compensation Fund:

    http://www.hkicc.org.hk/about_us/introduction_e.htm

    It turns out the ICF will only compensate you up to HKD150K max. A ridiculously small amount! especially for those who put a big portion of their life savings in stocks.

    I called up the ICF and a lady there suggested I check out the investor accounts with CCASS which is owned by the HKEX. I called up CCASS and the guy there said that similarly as stocks are held under HKEX's name, should HKEX go bankrupt (unlikely but theoretically possible), then yes, I'd also lose all my stocks except for the HKD150K claim against the ICF.

    So what to do? A lot of my life savings are in HK stocks and I would hate to lose my life savings just because my intermediary went bust!

    I thought our stocks and cash were to be segregated and presumably, accessible to us should the broker go bust but that appears not to be the case. How can I protect myself??

    TheBrit and Aakash123 like this.

  2. #2

    Join Date
    Aug 2007
    Posts
    1,192

    This sounds like a John Corzine/MF Global issue type of question. If you worry about such things I suggest just deal through blue-chip brokers and pay higher charges?


  3. #3

    The best of Hong Kong is that it is backup by China. HK People tends to buy apartments instead of stocks with lower risk


  4. #4

    Join Date
    Feb 2010
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    7,441

    Diversify your assets if you are worried.


  5. #5

    Join Date
    Dec 2012
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    904

    What?? If I buy shares of (say) HSBC through (say) BOCHK and BOCHK goes bankrupt I lose the shares of HSBC?? This doesn't make sense to me! Surely, the shares belong to me, and not to BOCHK.

    I guess I am reading you wrong.


  6. #6

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    Aug 2012
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    Do brokers go bust?


  7. #7

    Join Date
    Jan 2008
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    1,966

    yes

    YES!!!!!!!!!!!!!!


    Quote Originally Posted by greenmark:
    Do brokers go bust?

  8. #8

    Join Date
    Jan 2008
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    1,966

    To reduce the risk of loss from a Bankrupt Broker, you should trade through a large bank like HSBC or Hang Seng Bank.
    Other alternative is to open your account with CCASS. HK Government is a major shareholder of HKEx and have appointed their own directors on the board. Chances of HKEX going bankrupt is much lower, than you being killed in a road accident.

    nihaoma, shri and Aakash123 like this.

  9. #9

    Join Date
    Sep 2008
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    3,677

    I think it's strange that stocks and such would be lost. Cash I could understand but not securities that are held in my name.


  10. #10

    Join Date
    Feb 2013
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    457

    I'm sorry your stock broker went bankrupt and you lost all your money. I don't really know what else to say, so here's a


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