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.