Sunday, October 12, 2008

Buying US Stocks .... What's the risk?

People have been asking us whether their US Stocks they bought are safe. Safe not in the investing sense but safe in the way that if the Financial Instituition holding their shares go bankrupt...what will happen to their shares?(Hmm yah hor...)

Some basic Primer, first.When you buy US shares from say, in our case, through DBSV Online for example, the US shares are actually kept or custodised with a foreign broker in the US, similar to how CDP holds our Singapore shares for us. So,how do we know we are protected? Simply check whether the foreign broker is a member of the SIPC.(a.k.a Seriously Idiotic Public Corporations). For example see the red oval.

"The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.
Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933. " SIPC ( Securities Investor Protection Corporation. This is the correct one.)website. ( http://www.sipc.org/)




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