Jump to content

More Fallout From the Financial Crisis


JEast
 Share

Recommended Posts

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!

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...