How safe are shares held in Stockbrokers' nominee accounts?

S

Sunny

Frequent Poster
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Andrew365 said:
I do not agree with this 100%, in the trade flow example Sunny --> Davy --> Morgan Stanley, Davy would be acting on an Agent basis i.e. transacting on behalf of their client. Morgan Stanley would look at this differently to if Davy was doing a trade for themselves i.e to hedge their own risk. Ultimately though Morgan Stanley would view the risk differently 1 on an agent basis and 2 direct Davy exposure.
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No they wouldn't. It is not an lending trade. There is no credit risk in the transaction apart from failed settlement and these trades are usually only done on a deliver versus payment basis. Morgan Stanley don't care if Davy's want to buy shares for their own account or Joe Bloggs Account. The trade will still be between Davy and Morgan Stanley. All ISDA's and all other documention that allows these entities to trade will be in those names or related entites. Morgan Stanley doesn't care who the final beneficial owner of the shares are. It has no impact on the transaction at a street level.
 
Brendan Burgess

Brendan Burgess

Founder
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40,578
I prefer share certificates as I hold for the long term
  • There are no annual holding costs
  • I deal directly with the company - very important for the banks where I attend their AGMs and get the AGM notices directly
  • They are absolutely secure - I am not worried about the stockbroker I dealt with going bust.
But across the EU, people buy and hold shares in nominee accounts via stockbrokers without any worries.

Why is this such a worry here? Because the Morroughs liquidator (and Beaufort's in the UK) got their hands on the nominee accounts even though they were separate.

I have my long-term savings in shares so the Investor Compensation Scheme is of no use to me.

I have no idea if DeGiro or Davys is safe. I don't know who DeGiro is?

I sort of know who Davys is. But as someone pointed out once rock solid companies like AIB and BoI nearly went bust. I know it's different as Davys don't lend money. But I don't know if they do proprietary trading or not.

Brendan
 
A

Andrew365

Registered User
Messages
279
Sunny said:
No they wouldn't. It is not an lending trade. There is no credit risk in the transaction apart from failed settlement and these trades are usually only done on a deliver versus payment basis. Morgan Stanley don't care if Davy's want to buy shares for their own account or Joe Bloggs Account. The trade will still be between Davy and Morgan Stanley. All ISDA's and all other documention that allows these entities to trade will be in those names or related entites. Morgan Stanley doesn't care who the final beneficial owner of the shares are. It has no impact on the transaction at a street level.
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Davys are buying on the behalf of the client that can't access the market directly. I would imagine that under the wrapper of 'Davys' Morgan Stanley would have a number of individual client accounts relating to davys each with their own CSAs etc that segregate whether they are dealing with Davys Treasury department and or their client execution team.
 
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