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What does happen to your money if the broker fills bankruptcy?

Hello,

while I`m doing some research trying to find the best online broker, I also would like to know if here in Australia there is some sort of protection for your money once it is deposited in your broker`s account.

I read some bad stories and had friends that lost all their money in Italy and waited years to get it back with the Court because their broker was gone broken and seeing what is going on around the world, I`d be checking the terms and conditions of any broker/bank before to give them money that may disappear all of suddenly.

I sent an email to the ASX and to most of the top online brokers in Australia but after 4 business days, I still have no reply.

Am I asking too much or there is no protection simply because nothing bad ever happened in this Country?

Here is an extract of the email I sent them:

"I`d like to know how safe is my money once it`s in your account, I mean , I wish you all the best but seeing big companies like Bear and Stearns going broken in the U.S. , what does happen to my money if your company, one day declares bankruptcy?
In the worst case scenario, will I get my money back within days? Is there anyone guarantiing this in Australia?"

Thanks in advance

Tags: broker

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Replies to This Discussion

Permalink Reply by Miffy on October 15, 2008 at 5:27pm

If you put it with a bank, then you'll be protected under the new measures announced this week by Rudd. CommSec & Westpac Broking would do the trick.
Miffy

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Permalink Reply by italiandragon on October 16, 2008 at 1:42pm

Thanks for your reply, at the moment I just opened an eTrade account with ANZ since I am an ANZ customer and there was the $550 free brokerage promotion with eTrade.

Anyway, ASX finally replied to my email, here there is their answer:

-----------------------------------------------------------------

Thankyou for your email.

In relation to the integrity of various brokering firm services, I
suggest you pay close attention to the particulars of each individual
brokering contract being entered into.

However, there is the National Guarantee Fund that provides compensation
to investors in certain circumstances as set out in Division 4 of Part
7.5 of the Corporations Act with the booklet provided in the link below;

http://www.asx.com.au/about/pdf/NGFInformationBooklet.pdf

When you buy or sell financial products such as shares in a listed
company, you must exchange the title or legal ownership of those
financial products for money. This exchange is called settlement.

For financial products traded on the Australian Stock Exchange,
settlement is effected by a world class computer system called CHESS,
which stands for the Clearing House Electronic Subregister System.
Please have a read of the CHESS brochure provided in the link below
which may provide greater insight and clarification in the execution and
settlement of trades.

http://www.asx.com.au/products/pdf/chess_brochure.pdf