Are stocks protected from bankruptcy?

If you want to increase your money, experts advise you to go public. But what if custody account providers or fund companies go bankrupt? Is your money gone then?

The money that is in current, day or time deposit accounts at your bank is legally protected within the EU. This is called deposit protection. It applies up to a sum of 100,000 euros per customer and bank. So even if the institute goes bankrupt, nothing is lost. But what about securities such as stocks, funds or index funds (ETFs)?

There is no statutory deposit guarantee, but there is a different protective mechanism: Securities are part of the special fund. We’ll show you what that means exactly.

What does special fund mean?

Special fund In simple terms, stands for the money that you as an investor in, for example shares, Funds or ETFs at a Investment company have invested. It does not count among the assets that belong to the investment company itself. That means: if society goes bankrupt, the fund is protected against access by them or that of their creditors.

The same applies in the case of a Bankruptcy of the depository provider. Whether house bank, custodian bank or smartphone broker: whoever puts his money in Securities does not have to fear that the provider of the depot will go bankrupt. Stocks, funds, bonds and ETFs definitely belong to you and would be not part of the bankruptcy estate.

Currently pushing Smartphone broker in the market, who no longer charge any fees for the purchase of securities. The sources of income are accordingly limited and the competition is fierce. It remains to be seen whether all new brokers can hold their own in the long term. However, there is no threat to the securities.

What do I have to do in the event of bankruptcy?

If the depository provider goes bankrupt, you have to transfer the securities to a new bank or broker. That means you would temporarily not have access. That was it already.

If the investment company is insolvent, the right of disposal is transferred to the custodian bankwhich then has to ensure that a fund or ETF, for example, is processed.

What is not considered a special fund?

If you have invested money in so-called derivatives, there is a risk of total loss if the issuer of the derivative becomes insolvent. Derivatives are complex financial products with which you do not invest directly in stocks, bonds and the like, but are only derived from them.

With derivatives such as certificates, you only enter into an agreement with the bank that issues the derivative. From a legal point of view, they represent bearer bonds. This means that you become the creditor of the bank. If this goes bankrupt, your investment counts as part of the bankruptcy estate – and is therefore often completely lost.


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