Shares protected??

winston9

Hi,

If I use a bank to buy shares in different US and UK companies, and that bank goes bust where do I stand?

Will I still own the shares or does the bank hold the shares for me?

Bellx15

You own the shares - unless you get into some contrived arrangement with the bank. Just use the bank as a broker - make sure the shares are in your name.

winston9

If I was to use the HSBC will they send out share certificates in my name?

sdooley

It is usually possible to have paper share certificates, but it will cost you more.

If you have a nominee account, your shares have protection, but only up to a limit. The shares are in the name of the nominee, but provided your account does not allow for 're-hypothecation' (where the bank can lend out or sell the shares without your direct order e.g. if you have borrowed on margin to buy the shares) you will have beneficial ownership of the shares, and that can be enforced in priority to all creditors of the bank. This does not protect you if the shares have never been acquired! (the Madoff case)

winston9

So the safest bet would be to own the shares direct? ie paper certificate and on the companies shareholder list?

Blah99

winston9 wrote: »

So the safest bet would be to own the shares direct? ie paper certificate and on the companies shareholder list?

No, sdooley's answer is right but he's written it in a bit of a convoluted way. If you buy shares using any of the big brokers (iii.co.uk, hoodless brennan, share center etc) online services, they are your shares - the broker just holds onto them for you for convenience. When you buy a share you're automatically a shareholder and thus on the shareholder list - this is how you get dividends.

Basically don't bother with the hassle & cost of physical certificates. Use a decent online execution only broker with a nominee account and the shares are 100% yours. If the broker goes bust you still own them. It's like having a safety deposit box in a bank - if the bank goes bust you can still go and get your box out without the receivers trying to take it.

sdooley

What Blah99 said is right, you own shares held on nominee account, with one exception. If you borrow money from your broker to buy the shares "on margin" they aren't yours outright necessarily (this caught people who banked with Lehmans and Kaupthing out).

Also they're not yours if you buy them from a fraudster - so check your broker is regulated by the FSA.

I would say the risks of paper based share certificates are much higher - from theft and fraud to loss and forgetfullness.

mark5

The share center I have always found to be very good and a very simple system to use with no paperwork involved.

I tried Lloyds TSB a few times but didnt like the call centre system not to mention sending share certificates by post.

mking

Hi. Just wanted to confirm something that is related to this thread.

If I've got individual shares bought through an execution broker (selftrade) wrapped in an ISA, then the shares are held in a nominee account by selftrade for me and are safe if they have any problems?

I do get the dividends, but don't get any other shareholder benefits (e.g. deals in a BT shop if you have BT shares) or direct comms from the companies. So is my name actually on the share register or would it say something like self-trade nominee account 123456?
Thanks

dunstonh

The shares are in the name of the ISA manager.

are safe if they have any problems?

perfectly fine. They are ringfenced and would just need a new ISA manager to be appointed if selftrade went under.

FoxtonsRIP

Blah99 wrote: »

No, sdooley's answer is right but he's written it in a bit of a convoluted way. If you buy shares using any of the big brokers (iii.co.uk, hoodless brennan, share center etc) online services, they are your shares - the broker just holds onto them for you for convenience. When you buy a share you're automatically a shareholder and thus on the shareholder list - this is how you get dividends.

.

But doesn't the 50K limit apply to nominee accounts? If you hold more than 50K worth of shares in one and the company goes under you could lose out?