Do you really own the secruities in your brokerage account?
Do you really own the stocks, bonds, ETFs, and Mutual Funds sitting in your IRA, 401(k), or brokerage account? You do, but not in the way that you think. You are NOT the legal owner of that security. You own a contractual claim, what the law calls a “security entitlement” against a financial intermediary. Does this matter most of the time? No. Does this matter if we have a major financial crisis or if the financial institution you are dealing with gets into serious trouble, yes! If the financial institution pledges your securities as collateral for a loan and they go under, you could lose…
The skinny
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