How safe are your shares?

What happens if one of the firms holding your shares goes bust? It sounds an easy question, but the answer isn’t as simple as it might seem, says Cris Sholto Heaton.

MoneyWeek readers often ask about the safety of their investments. What happens if one of the firms holding them goes bust, for example? It sounds an easy question, but the answer isn't as simple as it might seem.

When you invest through a stockbroker or fund supermarket, the shares, bonds or funds you buy will usually be registered in the name of the broker you use. However, you are the "beneficial owner" of the securities, which means that you have rights over them. So if the broker collapses, your assets can't be taken by the broker's creditors. In the UK (but not all other countries), brokers hold client assets in the name of a nominee company set up solely for this purpose, which reinforces the separation between client assets and their own.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.