Prior to the global financial crisis, most savers had never considered the idea that their money might not be safe in a bank. That might also apply to brokerage accounts, where the system of using nominee accounts should leave client assets untouched in the event of a broker failure. However, some recent broker failures have called this protection into question.
Broker failures are rare, but happen at a rate of one or two each year. In October, discretionary fund management group Reyker Securities was placed in ‘special administration’ after it fell into financial difficulties. And there have been a number of other notable casualties in recent years: SVS, Beaufort Securities, Fyshe Horton Finney and Pritchard – enough, potentially, to trouble those holding investments with brokerage groups.
Those with assets tied up in a failed broker face a tense few months without access to their assets while administrators disentangle their portfolios. Broker failures often come out of the blue and investors will often only become aware of the problem after their assets have been frozen.