Subject: Re: Are Berkshire Shares Safe?
I got the following from the SIPC FAQ: https://www.sipc.org/for-inves...

How are margin accounts protected?

Under the Securities Investor Protection Act, what is owed to a customer is based on the customer's 'net equity.' 'Net equity' generally is the cash and securities owed to the customer by the brokerage firm minus any indebtedness owed by the customer to the brokerage firm. For purposes of computing a customer's 'net equity,' cash and securities that are collateral for a margin balance in a customer's account are amounts owed to the customer by the brokerage firm. To arrive at the customer's 'net equity,' however, the amount of the margin balance in the account ' which represents a customer debt to the brokerage firm - is subtracted from the total cash and securities owed to the customer by the firm.

If I have a margin account, what can I do to get my securities back?

A customer who has a margin balance in an account must pay the margin balance before any cash or securities otherwise owed to the customer can be returned. Any such payment must be approved by the trustee for the liquidation of the brokerage firm and must be made within the time period specified by the trustee.


From an eligibility for protection, it doesn't matter whether it is a margin or cash account and whether you have a margin balance or not. Your net equity is protected, however, process of recovery may be complicated if you have to pay your margin balance first and then wait to get your securities back.

I also got this information from my broker:

Additionally, Broker provides each client $149.5 million worth of protection for securities and $2 million of protection for cash through supplemental coverage provided by London insurers. In the event of a brokerage insolvency, a client may receive amounts due from the trustee in bankruptcy and then SIPC. Supplemental coverage is paid out after the trustee and SIPC payouts and under such coverage each client is limited to a combined return of $152 million from a trustee, SIPC, and London insurers. The Broker's supplemental coverage has an aggregate limit of $500 million over all customers. This policy provides coverage following brokerage insolvency and does not protect against loss in market value of the securities.

To our knowledge, claims on a private supplemental policy, such as our coverage by London insurers mentioned above, are extremely rare in the history of the SIPC (established by Congress in 1970). This is because most brokerages deposit their customer equities at the DTCC, a depository trust institution from which the equities are readily available to be recovered by SIPC and returned to you. (See www.dtcc.com.) Likewise, any investments in mutual funds or money market funds are also readily available for recovery from the fund.

I don't know if there is any scenario in which a broker has failed to register your securities with DTCC.

I hope never to have to find out how easy it is to recover my assets from a brokerage insolvency.