Post #17 by bighairymike on the Millionaire Shrewds board

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I'm not sure I know what makes a stock account vulnerable to a brokerage failure.

Does not ownership of the stock create an obligation between the holder of the stock and the company that issued it. If I buy a bunch of shares of Apple via Schwab, and Schwab goes out of business, am I not still a stockholder in Apple?

Baltassar

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Yes, here is how it works..

https://www.finra.org/investors/insights/its-your-...

Rather, most stocks these days are held in the 'street name' of the broker, rather than under the name of any particular investor. In that situation, when an investor opens an investment account, the stocks he or she buys are registered in the issuer's books as belonging to the brokerage firm. The brokerage firm, in its records, however, lists the investor as the actual owner. The broker holds the stock in a 'book-entry' form, according to the Securities and Exchange Commission.
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The street name system is designed to withstand even a brokerage firm meltdown. When a firm faces liquidation, regulators, including the SEC and FINRA, work to ensure that customers' securities are transferred to another firm. Keeping investments in street names can actually make the process easier because all of the documentation will be in one centralized account.
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... much more at link

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