How safe is my money if I buy an ETF through a broker?
- Thread starter Redshoes
- Start date
I'd imagine that's why he's asking.
I already asked them but that doesn't mean their answer is accurate. I know how much they will charge me.
I'm buying shares in an Index fund (google index fund), I am not relying on Davy in any way for advice or anything else. Davy do not spend much time with people who are buying an index fund because they make very little money.
My questions relates to the overall safety of the Davy itself.
I think from what I have researched that if Davy goes belly up the individual shares that people hold would be protected, because Davy does not own the shares they are simply performing the transaction of purchasing them on my behalf.
Under the Investment Compensation Act 1998, if an investment company goes bust, you are covered for up to 90% of your investment up to a maximum of EUR 20,000. See www.investorcompensation.ie
Well there are two aspects to this, first is what happens if the firm simply fails and secondly what happens if the firm fails as a result of criminal activity?
In the first case, your funds and holdings should have been kept separate from the firms assets and so you should be able to recover everything in time, but it may take some time.
In the second case where there is criminal activity it is very likely that your funds and other assets will have been used for other purposes and you will probably only get the maximum suggested by other posters from the compensation fund.
I've no idea, but go dealing with 'mickey mouse' brokers in the first place???
This is a good question. Even reputable companies like Saxo have very low guarantees. Interactive Brokers cover 500k for accounts held in the US. I suppose to mitigate risk, when one's account reaches a certain size, it might be prudent to start using multiple brokers...of course this will make things more costly.
This is not like a bank deposit, so long as there is no criminal activity involved the clients holdings etc will have been kept separate from those of the firm and you will be about to recover the lot, but from an administration point of view it might some time to do so.
In the Lehman's crash, I know of only one client that had difficult in recovering his assets and that was because he made a big transaction on the last day and as the staff walked of the job it was no accepted for properly so it took about six months for him to get it sorted out.