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What Happens to Your Investments If the Stock Broker Goes Bankrupt?

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What Happens to Your Investments If the Stock Broker Goes Bankrupt?

Since everybody wishes for incomes from investments in an intensely materialistic age, it is only natural that stocks and mutual funds, bonds and ETFs, futures, and certificates of deposit serve the purpose. Why should large sums of money lying in the savings account in banks when alternative forms of investment would fetch higher returns? When such investments are made, it is a stockbroker who takes the deposits and invests it in the company. Is it not possible to invest directly with the company? It is done that way too through advertisements in the media, but a brokerage company would be entrusted with the task of managing the accounts and disbursing annual interests.

The element of risk

Perhaps the investments in stocks and bonds would generate positive incomes for a lifetime, increasing and decreasing according to market forces.

Lucky investments might witness sky-high returns and traders are constantly busy studying the markets and buying and selling accordingly to maximize incomes and reduce the risk factor. The media contain stunning stories of rising and fall of business empires and romantic stories of how the richest persons profited or lost billions in a single day.

The role of the stockbroker

Is the money safe when you invest it? Market forces that are hard to predict decide that. The extent of profit or loss does not depend upon the stockbroker, but the rising and falling values of the shares decide that. The question to ask is the danger of the stockbroker getting bankrupt and closing shop like some mega businesses have done. Mergers and acquisitions in such cases could avoid the downfall in financial terms. If the stockbroker is well connected perhaps with a banking conglomerate, there is almost no risk of such bankruptcy, though no guarantees exist.

The study of financial history

The large-scale investments and transactions online that exist today have been made possible through digital technology that rules the internet. It is only since the 1990s, which means two decades only since such larger scale communication was possible. What happened before that? It was all paper-based and procedures worked very slowly compared to the lightning-like communication today. Large-scale investments commenced in America only in the 1960s, and even that was only about 50 years ago as compared to the thousands of years of business conducted by humanity! Currencies and the banking system have been rather recent but transactions took place earlier through barter and the use of metal currencies.

Securities Investor Protection Corp (SIPC)

Subject to certain terms and conditions and financial limits, SIPC legally protects the rights and investments of the public. Such protection is doubly important at times of financial crises as happened in 2008 or during war or natural calamities when normalcy is disturbed. While stocks and bonds are protected, some investments are not, like commodity contracts and limited partnerships or fixed annuity contracts.

The company where the investment was made should be a member of SIPC for the protection to apply. In terms of amounts, SIBC may cover $500,000 and $250,000 could be cash.

However, SIPC has done miraculous recovery work regarding 99% of such cases ever since Congress set it up in 1970. There is not much to worry about investments because separate accounts need to be maintained as compared to the stock broker’s accounts. Abuse may happen but does not occur often. Large investments need to be taken greater care of, with a few smaller investments, reducing the risk factor in several companies. Avoid excessive worry.

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Energy stocks drag down FTSE 100, IG Group slides

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Energy stocks drag down FTSE 100, IG Group slides 1

By Shivani Kumaresan

(Reuters) – London’s FTSE 100 slipped on Thursday, weighed down by falls in energy stocks as oil prices slid after a surprise increase in U.S. crude inventories, while IG Group tumbled on plans to buy U.S. trading platform tastytrade for $1 billion.

The blue-chip FTSE 100 index lost 0.4%, while the domestically focussed mid-cap FTSE 250 index also slid 0.4%.

Energy majors BP and Royal Dutch Shell fell 3.2% and 2.5%, respectively, and were the biggest drags on the FTSE-100 index. [O/R]

“What is holding back the UK is a lack of tech stocks to capture the ‘rotation’ back into tech seen since Netflix results,” said Chris Beauchamp, chief market analyst at IG.

“Stock markets overall are much quieter today, looking so far in vain for a new catalyst for further upside.”

The FTSE 100 shed 14.3% in value last year, its worst performance since a 31% plunge in 2008 and underperforming its European peers by a wide margin, as pandemic-driven lockdowns battered the economy and led to mass layoffs.

British Prime Minister Boris Johnson said it was too early to say when the national coronavirus lockdown in England would end, as daily deaths from COVID-19 reach new highs and hospitals become increasingly stretched.

IG Group tumbled 8.5% after announcing plans to buy tastytrade, venturing into North America after a stellar year for the new breed of retail investment brokerages.

Ibstock jumped 7.3% to the top of the FTSE 250 after the company said fourth-quarter activity benefited from better-than-expected demand for new houses and repairs.

Pets at Home Group Plc rose 2.2% after reporting an 18% jump in third-quarter revenue, boosted by higher demand for its accessories and veterinary services as more people adopted pets during lockdowns.

(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V and Mark Potter)

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Wall Street bounce, upbeat earnings lift European stocks

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Wall Street bounce, upbeat earnings lift European stocks 2

By Amal S and Sruthi Shankar

(Reuters) – European stocks rose on Wednesday after Dutch chip equipment maker ASML and Swiss luxury group Richemont gave encouraging earnings updates, while investors hoped for a large U.S. stimulus plan as Joe Biden was sworn in as president.

The pan-European STOXX 600 index closed 0.7% higher, getting an extra boost as Wall Street marked record highs.

All eyes were on Biden’s inauguration as the 46th U.S. President, with traders betting on a bigger pandemic relief plan and higher infrastructure spending under the new administration to boost the pandemic-stricken economy.

Tech stocks rallied to a two-decade peak in Europe after ASML Holding NV rose 3.0% to all-time highs on better-than-expected quarterly sales and a strong order intake for 2021.

Meanwhile, Richemont rose 2.8%, after posting a 5% increase in quarterly sales as Chinese splashed out on Cartier, its flagship jewellery brand.

Britain’s Burberry jumped 3.9% after it stuck to its full-year goals, saying higher full-price sales would boost annual margins, while Asian demand remained strong.

The pair boosted European luxury goods makers that are heavily reliant on China, with LVMH and Kering gaining between 1% and 3%.

“Any sign that retail spending is picking up in China is going to be a boost to the Western markets and those heavily exposed to it,” said Connor Campbell, financial analyst at SpreadEx.

The European Central Bank is set to meet on Thursday. While no policy changes are expected, the bank could face more questions about an increasingly challenging outlook only a month after it unleashed fresh stimulus to bolster the euro zone economy.

“With the new round of easing measures fully in place and no new forecasts to be presented tomorrow, it should be a fairly uneventful day for the euro,” ING analysts said in a note.

Italy’s FTSE MIB gained 0.9% and lenders rose 1.6% after Prime Minister Giuseppe Conte won a confidence vote in the upper house Senate and averted a government collapse.

Conte narrowly secured the vote on Tuesday, allowing him to remain in office after a junior partner quit his coalition last week in the midst of the COVID-19 pandemic.

Daimler AG jumped 4.2% after its Mercedes-Benz brand unveiled a new electric compact SUV, the EQA, as part of plans to take on rival Tesla Inc.

Germany’s Hugo Boss added 4.4% after Mike Ashley-led Frasers said it boosted its stake in the company.

(Reporting by Sruthi Shankar and Amal S in Bengaluru; Editing by Shailesh Kuber and Arun Koyyur and Kirsten Donovan)

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Miners lead FTSE 100 higher on earnings cheer

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Miners lead FTSE 100 higher on earnings cheer 3

By Shivani Kumaresan

(Reuters) – UK’s FTSE 100 rose on Wednesday as miners gained after a strong production forecast from BHP Group, while encouraging updates from luxury brand Burberry and education group Pearson drove optimism about the earnings season.

BHP Group Ltd climbed 2.8% after it forecast record iron ore production for fiscal 2021, helped by high prices for the commodity. Other miners Rio Tinto, Anglo American and Glencore rose more than 2%.

Global markets rallied in anticipation of more fiscal spending as Joe Biden prepared to take charge as the 46th U.S. president.

“There is a view in the markets that more spending is in the pipeline, after all, Mr Biden will want to start his presidency on a positive note,” said David Madden, market analyst at CMC Markets UK.

The FTSE 100 index rose 0.4% and the domestically focussed FTSE 250 index added 1.4%.

The FTSE 100 has recorded consistent monthly gains since November after the sealing of a Brexit trade deal and hopes of a vaccine-led economic recovery, but has recently lost steam as tighter business restrictions sparked fears of a slow rebound.

Burberry rose 3.9% as it stuck to its full-year goals and said higher full-price sales would boost annual margins and Asian demand remained strong.

Global education group Pearson jumped 8.6% after its global online sales grew 18% in 2020, helped by strong enrolments in virtual schools.

WH Smith Plc surged 10.4% to the top of the FTSE 250 index as its trading during Christmas was ahead of its expectations.

(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V, William Maclean)

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