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From: brett@ucla-cs.UUCP
Newsgroups: net.invest
Subject: Re: Stockbroker selection, discount brokers.
Message-ID: <7913@ucla-cs.ARPA>
Date: Thu, 5-Dec-85 20:52:34 EST
Article-I.D.: ucla-cs.7913
Posted: Thu Dec  5 20:52:34 1985
Date-Received: Tue, 10-Dec-85 06:08:58 EST
References: <2267@amdahl.UUCP> <11094@ucbvax.BERKELEY.EDU>
Distribution: net
Organization: UCLA Computer Science Department
Lines: 36

> Not really.  If the broker keeps the certificate, the broker can carry
> your "ownership" of the stock as a ledger entry without aquiring the stock
> from someone else. Furthermore, the broker is able to borrow against YOUR
> stock, for the broker's benefit. Both of these activities, complicate
> retrieving your stock in the case of failure.

No way.  In a cash account a broker MAY NOT borrow against YOUR stock
for the broker's benefit.  It's only in a margin account where that can
be done.  In the latter case you can't get delivery of the stock anyhow.

> 
> Also, if a failure does occur, and they DO OCCCUR regularily, your stock
> will be frozen for months - you will not be able to sell it or borrow on it.
> The SIPC will PROBABLY eventually get your stock back for you, but if you
> sustain a loss during the period (either because the stock price goes
> against you, tax reasons, or hedge strategies), the loss is yours.
> 
> ...Larry Mazlack

The selling issue is easy.  You sell short with 
another broker and when the stock is unfrozen
deliver your certificates.  It will cost you margin 
charges; maybe not even that if you appeal it - I'm not sure.

I don't know how to handle the borrowing issue.
-- 
Brett Fleisch
University of California Los Angeles
LOCUS Research Group
3804-f Boelter Hall
Los Angeles, CA 90024
Phone: (213) 825-2756, (213) 474-5317 

brett@LOCUS.UCLA.EDU
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