How do you manage the risk of your 'broker going bankrupt'?
As you would probably know, the stocks are held by your broker in 'street name' and not in your own name. I know there is CIPF that guarantees up to $1 million but when you read the coverage conditions, I see many risks there. For instance, any loss due to fraud is not covered. In other words, if your broker committed fraud on your securities, there is no recourse. Further, no coverage unless your broker actually goes 'bankrupt' and into liquidation. In other words, if broker is still solvent after screwing you over, you have to sue broker to recover losses. CIPF will not cover your losses.
I have also heard that only cash accounts are covered (i.e. margin accounts are considered part of general pool which means you are treated as 'general creditors'). I don't think this is correct but who knows......it seems complicated enough to be a concern.
What are some of the things you do to protect against your broker going bankrupt? How do you manage that risk?
Lastly, have you considered using DRS service such as Computershare so that you can have the shares registered in your own name instead of in your broker's name? Any pros and cons of using Computershare for your 'long-term' or 'forever' stocks ?
— George Leigh Mallory