More Fallout From the Financial Crisis

[JEast]

Another Ponzi scheme bites the dust.  Though the story is a little old, the futures brokerage PFGBest is finally being liquidated after stated assets of $225 million turns out to be only $5 million in their bank account.

 

http://in.reuters.com/article/2012/07/10/broker-pfgbest-mfglobal-idINL2E8IA00120120710

 

Cheers

JEat

[dpvalliant]

Could someone explain if a company like TD Ameritrade had financial problems.  Would we be able to get our stocks and cash held by them back?

[Parsad]

For the most part, the answer is yes.  Client accounts, both margin and cash only, are to be segregated from the institutions own assets.  The problem arises with margin accounts.  Institutions can lend out shares in your margin account without your permission during normal trading operations, and of course their intent is always to make good on returning those shares to you.  But if those shares are lent out during a crisis, and the institution does not have the ability to make good on returning those shares, the liabilities are comingled with the institutions own assets and liabilities when the trustees take over.  Usually, they will make good over a period of time after the trustees have taken over, but there is no guarantee...especially if the losses for the institution are so large, that it would be difficult to make all investors whole.  Cheers!

[oldye]

Just found out my dad has a small account with them, now frozen.  There is never just one cockroach

[dpvalliant]

Thanks Parsad for the help.  I guess I feel a little better.