Whose balance sheet is relevant to gauge the risk that I lose my shares in case of financial bankruptices?

External question — Personal Finance Stack Exchange Author: Mikke Mus Original post: https://money.stackexchange.com/questions/156874 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. If there is a financial crisis in the future; whose balance sheet is relevant to assess the risk that I lose my shares in case of bankruptcies of financial institutions? I assume it is the balance where my stocks appear as an asset. Is that correct? In that case, is it the depository, exchange, broker or the custodian, or someone else's balance sheet I should investigate for solvency issues? For bankruptcy, does it matter whether I hold the shares in street name, or direct registration? I know that some institutions have insurance up to some limit (perhaps £15K or >$100K in some cases), but I have more than that in the market. And the insurers might not be able to pay, so I want to minimize risk by being with institutions that I think have a strong balance sheet to begin with.

External answer — Personal Finance Stack Exchange Author: mhoran_psprep Original post: https://money.stackexchange.com/a/156875 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. If there is a financial crisis in the future; whose balance sheet is relevant to assess the risk that I lose my shares in case of bankruptcies of financial institutions? If you invest in a bank, you are invested in a company. That company can go out of business. When a company collapses investors, creditors, and customers may suffer the same fate (being wiped out) or different fates depending on the sequence of events and how how much cash can be secured. In many countries a quasi-government organization insures bank deposits to some extent. If you have less money on deposit with that bank. then you are protected, and made whole in a matter of days. But that doesn't protect the investors in the bank. If the bank collapses there may be nothing left once the deposits are transferred to another bank, and so are the assets (mortgages, car loans, personal loans...). In most cases there is no insurance to protect investments. There is risk in every investment. If a company you own shares struggles, the market looks at their required quarterly filings and decides the company is not worthy of investment and drives the price of a share down to an appropriate level. But if they believe that good times are in the future, then they drive the price up. If the company collapses, then shares keep dropping towards zero, or the business enters bankruptcy and the court determines how much the investors, creditors and customers get. For bankruptcy, does it matter whether I hold the shares in street name, or direct registration? Nope. If the court says every share will get $0.02 then it doesn't matter if they send you the money directly or via a broker. It is possible that there is some insurance on your investment. In the United States you have some protection if the broker commits a crime. It doesn't protect you if you pick the wrong company to buy shares in, or buy bonds from.

External answer — Personal Finance Stack Exchange Author: Ben Miller Original post: https://money.stackexchange.com/a/156893 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. When you own shares of stock through a brokerage, those shares are yours. The brokerage is holding them for you. Assuming the brokerage is not acting illegally, if the brokerage goes bankrupt, those shares are still there; the SIPC steps in to help you access your shares and transfer them to another broker. The company that you own shares of might run into trouble, and the stock value might plummet, but you’ll still have your shares. If the broker is doing something illegal and your shares are not there, the SIPC also steps in to help, although their help will look different.