Make sure your stock holdings are INDIVIDUALLY REGISTERED

swissaustrian · Dec 10, 2011

Note: As a Swiss resident, I´m not an expert in US securities law, so don´t kill me if I use legally wrong terms. I´m sure the essence of my post is correct, though.

A lot of people are starting to worry about counterparty risks of brokerages in the aftermath of the MF Global bankruptcy. There are obvious counterparty risks in bonds, ETFs, futures, options, and all kinds of derivatives.
Normally stock certificates don´t have a counterparty - except the company you are invested in.
I´m sure a lot of us are holding mining shares, and we probably wouldn´t worry about them in the case of an implosion of financial system. Afterall, the miners should profit from that, right?
If you're holding your stocks in a brokerage account, you shouldn´t assume that you automatically are the legal owner of your stocks, though.
A lot of brokerages hold stocks as trusteeson behalf of their customers. This means that you as the client only have a claim against your broker. You DO NOT own the stock. If the broker goes bankrupt, you´re left with (possibly) nothing.
This is why it is essential to check whether your stocks are registered in your name and not in the name of your broker.
If your broker acts as your trustee, you should immediately register your stocks in your own name. If your broker doesn´t offer that service or rejects to do so, close your account and get a new broker.
Here is how you do an individual registration:
http://www.ehow.com/how_7201721_do-register-stocks_.html
Also make sure that your shares are not part of a so called "dark pool".

In finance, dark pools of liquidity also referred to as dark liquidity or simply dark pools is trading volume or liquidity that is not openly available to the public. The bulk of these represent large trades by financial institutions that are offered away from public exchanges so that trades are anonymous. The fragmentation of financial trading venues and electronic trading has allowed dark pools to be created, and they are normally accessed through crossing networks or directly between market participants.
...
broker-owned dark pools where clients of the broker interact, most commonly with other clients of the broker (possibly including its own proprietary traders) in conditions of anonymity

http://en.wikipedia.org/wiki/Dark_liquidity

ancona · Dec 10, 2011

If you buy the stock from someone who has "borrowed" the shares so he could short them, you may never see the shares.

escobar · Dec 14, 2011

from my understanding if you ever plan to trade any stocks this makes things extremely difficult. taking physical delivery of the stock certifcates is very cumbersome. If you plan to own KO for 30 yrs maybe but if you have a portfolio and trade and rebalance stuff out almost impossible to do. let me know if i am wrong.

ancona · Dec 14, 2011

Escobar, you are absolutely correct. The point I am making is that most brokers never actually buy the stock you paid for, they just add pixels to your account page that makes it look like they did.

That said, after this MF Global debacle, I will NEVER buy paper again. Not until the rot is purged from this corrupt kleptcratic system. I'm sticking with p[lain vanilla physical silver.

swissaustrian · Dec 14, 2011

There is another choice:
Direct registration:

As an individual investor, you have up to three choices when it comes to holding your securities:

Physical Certificate — The security is registered in your name on the issuer's books, and you receive an actual, hard copy stock or bond certificate representing your ownership of the security.

"Street Name" Registration — The security is registered in the name of your brokerage firm on the issuer's books, and your brokerage firm holds the security for you in "book-entry" form. "Book-entry" simply means that you do not receive a certificate. Instead, your broker keeps a record in its books that you own that particular security.

"Direct" Registration — The security is registered in your name on the issuer's books, and either the company or its transfer agent holds the security for you in book-entry form. The "Direct Registration System" (also known as "DRS") allows investors to transfer securities held this way. For more information about DRS, please see our Frequently Asked Questions below.

http://www.sec.gov/investor/pubs/holdsec.htm

ancona · Dec 14, 2011

I know all of the rules SA, and agree that there are several ways to "hold" stock, but I am the eternal skeptic when it comes to stock ownership. I agree there are many folks who glean a good living in the markets, and that there is a lot of value in the greater portion of companies listed, but when I see stockholders get fucked by companies who cintinuously dilute tehir holdings with new offerings, and subordinate them out in favor of senior holders and preferred holders, I cannot help but be skeptical of the whole thing.

swissaustrian · Dec 14, 2011

I hold some certs of mining companies in case the shtf.
Besides that, I use drs. The system is a bit different over here in Switzerland, though.

ancona · Dec 14, 2011

swissaustrian said:
I hold some certs of mining companies in case the shtf.
Besides that, I use drs. The system is a bit different over here in Switzerland, though.

Theings are more than a little different in Switzerland. Your govenrnment is not anywhere near as corrupt as ours, and the banking industry still has some morality and ethic they operate under. In addition, every swiss is issued a rifle, and required to practice with it [I believe]. That alone makes me jealous. An armed nation is a polite nation.:clap:

swissaustrian · Dec 14, 2011

Well, the gun owner story is only partially correct. But I like your enthusiasm towards my country .
Only military people get a gun from the government. Our military is organized like a militia. Every young man has to serve (you can buy a waiver, though). The service isn´t one big block of time. It´s rather divided into a basic service (20 weeks) plus several short periods of time during up to the age of 40.
In recent years our military has been downsized. We just don´t have any external threats. Terrorism is unknown over here except in the banking system (money laundering for terrorists )
They obviously don´t hate us although we´re free and very rich.

DCFusor · Dec 14, 2011

I'm not so sure that any certification on a piece of paper helps that much of the S really hits the fan...jurisdiction issues, who knows what's collapsing, and so on.

If you're basically worried about losing the rule of laws and regulations, it would seem depending on some regulation is missing the point.

I believe the sooner you come to the belief that this is all picking up pennies in front of a steamroller, and realize the risk (which makes you tend to get out at any real twitch - or at least invest any profits in various physical things) the better off you'll be longer term.

It's all a game of risk at some level, may as well admit that you can't possibly depend on others to control all that for you, in the form of laws, certs, whatever. They can all fail, and of course, in this case that will only happen if things are really bad otherwise.

"And we just laughed, sittin' on our bag of seeds."

swissaustrian · Dec 14, 2011

DCFusor said:
I'm not so sure that any certification on a piece of paper helps that much of the S really hits the fan...jurisdiction issues, who knows what's collapsing, and so on.

There´ll be a judicial system when things get back to normal. If you can proove that you´re the rightful owner, you will be protected.
Healthy companies can survive almost everything - including a collapse of a financial system. Take Germany´s biggest companies (Siemens, BMW, Daimler, ThyssenKrupp). Since the industrial revolution Germany lost two World Wars, got divided, had three monetary reforms (1923, 1948, 2000) and a hyperinflation (1922-23). These companies survived it all and still offer world class products.

DCFusor · Dec 14, 2011

Sure, the company survives, but does that imply their stock certificates, issued before some major collapse, still mean anything? Or do they just take the money and run.

Even now, I can't turn my shares back into the issuing company and get anything whatever. That was my point - it's all based on what some other entity will pay for it, regardless, intrinsic value = zero - even more so than fiat currency.

swissaustrian · Dec 14, 2011

DCFusor said:
Sure, the company survives, but does that imply their stock certificates, issued before some major collapse, still mean anything?

I know Germans who have owned Siemens stocks for over 90 years. They´ve passed them on from generation to generation.
So in the case of Germany, stockholders got protected.

swissaustrian · Dec 21, 2011

In a recent interview, Marc Faber essentially made the exact same point I made earlier:

on the long-term future: "I am ultra bearish. I think most people will be lucky if they still have 50% of their money in 5 years time. You have to have diversification - some real estate in the countryside, some gold and some equities because if you think it through, say Germany 1900 to today, we had WWI, we had hyperinflation, WWII, cash holders and bondholders they lost everything 3 times, but if you owned equities you'd be ok. In equities in general you will not lose it all, it may not be a good investment, unless you put it all in one company and it goes bankrupt."

http://www.zerohedge.com/news/mark-...ives-market-will-cease-exist-and-will-go-zero

Also worth reading, a more sophisticated than my take on "insurance" of stocks holdings from counterparty risks. The whole document is only available to subscribers of the Morgan Report www.silver-investor.com:

“BulletProof Shares” – How To Protect Your Stocks From Broker Bankruptcy & Theft
December 19, 2011 | By Tekoa Da Silva |
As mentioned in my last post, the recent MF Global bankruptcy has now set a precedent stock investors and asset managers simply cannot ignore. MFG is a widely misunderstood bankruptcy, which many believe affected the futures market only. What most people don’t know is that MFG was a clearinghouse for stocks as well. I was lucky enough to speak with an agent at SIPC last week, who informed me that 800 account holders at MF Global lost their stocks during the collapse.
Additionally, I learned the SIPC insurance fund carries only about $1 billion in cash, with a further $2.5 billion backstop provided by the U.S. Treasury. These amounts are shockingly small in my opinion. They tell me that only one or two major broker dealer bankruptcies will be sufficient to tap out all SIPC funds, leaving an entire generation of stock investors with permanent, non-recoverable losses. The financial system is becoming increasingly fragile, and what MFG provided was a stark warning to anyone paying attention.
The only way to fully protect your shares from the system itself, is to move them away from negligent custodians currently engaged in “collateralization” and “hypothecation” of customer accounts. In the next major clearinghouse/broker dealer collapse, which is only a matter of time in my opinion, those individuals who sever all counter party risk from their shares will be side-stepping major train wrecks.
Below is my paper on this subject entitled, “BulletProof Shares – How To Protect Your Stocks From Broker Bankruptcy & Theft.” It is a how-to guide on moving your shares out of the reach of insolvent brokers and the financial system. Hopefully it will may save your accounts from substantial counter party risk events and losses.
Due to the extraordinarily well-received release of “BulletProof Shares – How to Protect Your Stocks From Broker Bankruptcy & Theft”, I regret to inform you it will no longer be given away for free. It will be available soon through a major financial newsletter publisher.
Feel free to share this page with all your family and friends who may be invested in the U.S. or Canadian Stock Markets.
Thanks, Tekoa

http://bullmarketthinking.com/bulle...ect-your-stocks-from-broker-bankruptcy-theft/

swissaustrian · Mar 9, 2012

GATA is now advertizing a link to an explanation how to protect shareholdings form (broker) bankruptcy:

It's an ebook (“BulletProof Shares – How To Protect Your Stock Investments From Broker Bankruptcy & Theft”) which you can buy for $44. Here's the website:
http://tdv.bulletproofshares.com/gata/

David Morgan did a short interview with the author:

DSAbug · Mar 9, 2012

escobar said:
from my understanding if you ever plan to trade any stocks this makes things extremely difficult. taking physical delivery of the stock certifcates is very cumbersome. If you plan to own KO for 30 yrs maybe but if you have a portfolio and trade and rebalance stuff out almost impossible to do. let me know if i am wrong.

It's about a 2-4 week process.. If you plan to sell the shares, you probably want to get them to the custodian weeks ahead of time. It's a pain in the ass but it removes a big risk.

Make sure your stock holdings are INDIVIDUALLY REGISTERED

Welcome to the Precious Metals Bug Forums

swissaustrian

Yellow Jacket

ancona

Praying Mantis

escobar

Predaceous Stink Bug

ancona

Praying Mantis

swissaustrian

Yellow Jacket

ancona

Praying Mantis

swissaustrian

Yellow Jacket

ancona

Praying Mantis

swissaustrian

Yellow Jacket

DCFusor

Yellow Jacket

swissaustrian

Yellow Jacket

DCFusor

Yellow Jacket

swissaustrian

Yellow Jacket

swissaustrian

Yellow Jacket

swissaustrian

Yellow Jacket

DSAbug

Yellow Jacket

Make sure your stock holdings are INDIVIDUALLY REGISTERED

Welcome to the Precious Metals Bug Forums

Yellow Jacket

Praying Mantis

Predaceous Stink Bug

Praying Mantis

Yellow Jacket

Praying Mantis

Yellow Jacket

Praying Mantis

Yellow Jacket

Yellow Jacket

Yellow Jacket

Yellow Jacket

Yellow Jacket

Yellow Jacket

Yellow Jacket

Yellow Jacket

Privacy & Transparency

Privacy & Transparency