Jim’s Mailbox

Posted at 5:23 PM (CST) by & filed under Jim's Mailbox.

Jim Sinclair’s Commentary

There is an axiom that must be remembered under today’s strange financial circumstances with top financial management by sociopaths.

The guarantee is no better than the guarantor.

Hi Jim,

Regarding Jeff Berwick’s article, "Who Really Owns Your Gold Stocks?," it is important for JSMineset readers to understand the limitations of SIPC protection. Page four of the booklet “How SIPC Protects You” says, "Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered."

I asked SIPC specifically if securities held in "street name" are considered to be registered in the name of the customer and thus eligible for complete protection. SIPC replied:

"In a liquidation proceeding under the Securities Investor Protection Act ("SIPA"), customers of a failed brokerage firm first get back all securities that are already registered in their name or are in the process of being registered, these are called "customer name securities." Customer name securities are negotiable only by the registered owner.

Securities held in "street name" are not considered customer name securities. In a SIPA liquidation proceeding, after the return of customer name securities, the remaining customer assets make up the "fund of customer property." The fund of customer property includes all customer securities held in "street name." The fund of customer property is divided on a pro rata basis with funds shared in proportion to the size of claims. If securities are still missing after the pro rata distribution, the customer would then be entitled to the coverage provided by SIPC, up to the statutory limit."

The SIPC brochure is available for download here: http://www.sipc.org/how/brochure.cfm

I could elaborate on discussions I had with SIPC, which raised additional red flags, but the above should be enough to encourage anyone who is serious about protecting him or herself to take action.

Best Wishes,
CIGA Paul