Are stocks in E*trade account save if E*trade goes under?

Question

I currently hold stock in several public companies on NASDAQ.

If E*Trade files for bankruptcy, are my stocks in E*trade account save???

Answer 1

If ETrade files bankruptcy right now, your account will be protected by the SIPC (Securities Investor Protection Corporation).  They insure up to $500,000 net equity balance and up to $100,000 in cash.  I'm not sure if ETrade has "excess SIPC" protection.  I'm pretty sure they do because most brokers provide it.  The amount of "excess SIPC" protection may vary among different firms as well.  I currently use Firstrade and they provide unlimited account protection.

Answer 2

Yes.  Every brokerage firm in the US is covered by SIPC (Securities Investors Protection Corp) which insurance each customer account for $500,000 in market value of securities and $100,000 in cash.   Many brokerage firm carries additional insurance which would raise the mandated amount required by SIPC.

If and when a firm files bankrupcy, all securities are "locked" down and when a receivor is assigned a market value is assigned to each and every position..  All security positions are reconciled.  Money balances are also reconciled.  Once both reconcilitations are made, the customers are notified and delivery and/or payments instructions are requested.

Usually in routine B/D bankrupcies that are forced to liquidate under SIPC, the firm has fallen below its net capital requirement and does not have operating capital these situations have no impact on customer securities and/or monies.



HOWEVER, before brokeage firms file bankrupcy, the firm is usually sold to another broker/dealer.  Security positions and money balances are just moved to the new firm and business continues as usual.  Most of the moves are usually transparent to the customers or than submitting new account agreements, including new account, margin, option agreements.

Answer 3

Yes, up to a point.  While there is no brokerage firm equivalent of a bank's FDIC, there is the SIPC (www.SIPC.org) which protects your holdings from insolvency, up to a point (usually $500k for securities and $100k of cash).  Brokerage firms can also buy additional coverage for their investors.

It is important to note that this does not cover losses you incur from trading, it only maintains your holdings in case of insolvency.

The following link shows you their levels of SIPC coverage and additional insurance:

https://us.etrade.com/e/t/welcome/welsta...