# Shares held through stockbrokers - how safe?



## autodidact (18 Feb 2009)

I own various shares held for me by my stockbroker.  They are held for me through Crest in a separately designated account, presumably in the name of the broker's nominee company.

I have no reason to to believe that my assets are currently at risk in any way, or that my broker is anything other than a well-managed and financialy sound institution, but in the times we live in I would like to understand to what extent I may be exposed to risk in the event of an extreme and unforeseen development.

How safe is this arrangement in the event that the firm fails?  I note that the maximum cover provided by the investor protection scheme is only €20,000 and my shares are worth much more.


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## Ravima (18 Feb 2009)

If held in CREST, they are probably in YOUR name. Do you get correspondence from the company or from your broker?


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## autodidact (18 Feb 2009)

I don't get anything direct from the investee companies.


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## Ravima (19 Feb 2009)

First thing to ask broker is, are you in the NOMINEE account or are you a SPONSORED CREST MEMBER.

There are advantages and disadvantages to both. With the former, you get no communication direct from the company, but then again, no nosey parker can check to see if you are a shareholder and you can avoid getting junk 'investment' advice, ususally share tips for the next microsoft etc.

With the latter, you get the correspondence direct and there is no delay in getting them. you can also qualify easier for an shareholder perks.

In view of the Morrogh collapse, if you are using an Irish broker, you would be better in Sponsored Member of Crest as the shares are clearly yours and in the event of the broker going belly up, thre should be no difficulty in transferring to another broker. If in the nominee account and broker goes belly up, the liquidator owns the nominee stock.


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## autodidact (23 Feb 2009)

Thanks Ravima.  I'm concerned when you say "If in the nominee account and broker goes belly up, the liquidator owns the nominee stock".  Surely the broker never "owns" my shares in a beneficial ownership sense, so how can a liquidator (or receiver or examiner) acquire ownership?  Possible a question for the lawyers.
An equal or greater concern probably would be a broker which finds itself in financial difficulties and sells shares for which it is nominee to generate cash to keep itself going.


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## Scamspy (21 Dec 2010)

*"Nominee"*

I (and over 10 contacts of mine) purchased quite a number of different shares from FSW Europe GmBh run by UK nationals. The documentation said that the shares would be held by CSSA Chicago, legal Custodian Philip Powers. FSW Europe eventually went insolvent and Powers said the share were transferred to Panama from whom we obtained requests for 'safe custody' annual fees (The letter said that we would forfeit ownership of our shares if we did not pay.). The shares later were so poorly valued as to less than those fees.
We later learned that FSW Europe had its licence revoked, CSSA Chicago is unknown to the US authorities, Powers has just lost his appeal in a US court to a boiler house connection judgement and the address in Panama does not reply.
The European (German, UK, Irish, EU) authorities appear to have little interest in our problems. Conclusion: Perhaps insist on getting you share certificates in hard copy form.


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## Ravima (22 Dec 2010)

lesson here is to use regulated brokers/investment advisors.
In what country was FSW Europe GmBh registered, where was its operations office, which central bank regulated it, and were the shares in listed companies or was it a 'boiler' operation?


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## Allen (23 Dec 2010)

QUOTE=autodidact;814341] I'm concerned when you say "If in the nominee account and broker goes belly up, the liquidator owns the nominee stock". Surely the broker never "owns" my shares in a beneficial ownership sense, so how can a liquidator (or receiver or examiner) acquire ownership? [/QUOTE]

_The broker does not own the shares but the liquidator can take over ownership. _



> how can a liquidator (or receiver or examiner) acquire ownership? Possible a question for the lawyers.


 
_Already determined by the courts in the Morrough case._


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## Bedlam (5 Jan 2011)

I waited 4 years after the Morrough collapse to get confirmation and dividend payments on US Shares held on Crest while the Liquidator decided whether they were my shares or not.

Give me a share certificate anyday

Bedlam


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