Monday, November 12, 2007

Help! E*Trade's Got My Money! (ETFC)

I'd like you to meet the SIPC (scroll down)

The Wall Street Journal's MarketBeat blog gets our nod for blog of the week.
(I'd go with "of the month" but maybe some blogger figures out the Grassy Knoll thing before the 44th anniversary of a really bad day in Dallas)

For E*Trade bank customers:
FDIC Mythbusters *

Other E*Trade posts at MarketBeat:

Log On to E*Trade. Sell E*Trade.
Four at Four: Backing Away from E*Trade
Premarket: Frayed E*Trade

Regarding securities held by E*Trade; should they become insolvent, this is "Big Daddy, Gonna take care of you" The Securities Investor Protection Corporation;

From their website:
Answers to the 7 Most Asked Questions

  1. How can I be sure I am dealing with a SIPC member? Why is that important?
  2. What should I be vigilant about before a problem strikes?
  3. How quickly will I get my investments back?
  4. Who is not eligible for SIPC protections?
  5. Where do I submit my claim forms?
  6. Is there a time limit for filing claims?
  7. Do I have to prove what the broker owes me? How does that work?
*What SIPC Covers... What it Does Not

The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.

Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses. For more information click here.

Our 36-Year Track Record for Investors

The Securities Investor Protection Corporation is the investor's first line of defense in the event a brokerage firm fails owing customers cash and securities that are missing from customer accounts. From the time Congress created it in 1970 through December 2006, SIPC has advanced $505 million in order to make possible the recovery of $15.7 billion in assets for an estimated 626,000 investors. Although not every investor is protected by SIPC,
SIPC estimates that no fewer than 99 percent of persons who are eligible have been made whole in the failed brokerage firm cases that it has handled to date.

*Why We Are NOT the FDIC

"Insurance" for investment fraud does not exist in the U.S. The Federal Trade Commission, Federal Bureau of Investigation, state securities regulators and other experts have estimated that investment fraud in the U.S. ranges from $10-$40 billion a year. In the case of microcap stock fraud, the toll on investors has been estimated as $1-3 billion annually.

With a reserve of slightly more than $1 billion, SIPC could not keep its doors open for long if its purpose was to compensate all victims in the event of loss due to investment fraud.

It is important to understand that SIPC is not the securities world equivalent of FDIC–the Federal Deposit Insurance Corporation.
Congress specifically considered creating a Federal Broker-Dealer Insurance Corporation, but lawmakers wisely concluded that such a designation would be both misleading and out of step in the risk-based investment marketplace that is so different from the world of banking.