Hi and sorry for the newbie question

I'm thinking about buying into an ETF, maybe the SLV or GLD or GDX funds. But...

... if the company you buy the ETF through (eg. ishares or barclays share dealing) goes bust, what happens to your ETF holdling? Does that go down with the share dealing company that you used to make the trade?

Anyone know of a safe (?) way of buying these ETF shares?

Thanks very much.

tm

I use Hargreaves Lansdown for trading in ETFS Physical Gold (PHAU) and Physical Silver (SLVR). I have my SIPP with them also so I guess I trust them with my pension too. You have to trust someone in this life, unless you're taking delivery of metal (personally, I don't want the hassle of that or the extra costs and want to stay liquid).

-w

Thats a good question and I've wondered about it too. I dont know the answer but i'm guessing that your shares dont go down with the share dealing company but would be transfered to another share dealer as part of an agreement with the administrators.

Can anyone confirm this?

The normal practice is that if you buy shares through a stockbroker, is that the stockbroker holds the shares for you in a 'nominee' account. Essentially, this means that they are held in trust by the broker. However, the shares are in your name, and you own them. Because they are held in a separate trust account, if the broker goes bankrupt, the client trust account cannot be seized.

The catch is that this protection is only *required* for 'standard' trading accounts. 'Professional' trading accounts, don't have to have this type of protection.

The other issue is is the company running the ETF (e.g. ETF securities Ltd.) went down. However, in the case of the physical metal funds (PHAU, PHPT, PHAG, PHPD and PHPM) the shares are 100% secured on allocated metal, so any shortfall should be minimal. Even the paper funds (e.g. BULL and SLVR) are secured on contracts, so the value should be recoverable.

My personal feeling is that they are safe, and I'm in the process of moving a considerable amount of savings into this type of fund.