(02-02-2024, 11:36 PM)MoJagFan Wrote:

(02-02-2024, 03:47 PM)Jaguarmeister Wrote: I don't know the full details of the Madoff victims' payoff off hand, but I can see why they weren't treated as such, if so.  There aren't actually "gains" in a ponzi scheme.  Madoff was just calling them "gains", but really it was just new investors' money.  That's a big difference from actually risking capital through a true investment broker or gambling establishment and coming out a winner whether they were led to believe that was the case or not.  In short, a criminal enterprise calling a return in excess of initial investment "gains" doesn't make it so nor should it absolve the recipient of having to pay those funds back to other aggrieved parties.

The lesson from that should be if you have an investment advisor outside of one of the big brokerage firms like Fidelity or Schwab, your advisor should still custody your assets in separate accounts in your name at one of the big brokerage houses.  They can't do what Madoff did when custodied at places like that.

Legally the big firms don't have to give you squat if they gamble your money and get toasted on margin calls. The law is on the big investment places and your brokerage account is just an asset they can liquidate to satisfy their debts. Unlike the Jaguars organization thief who will get jail time the brokerages will just cut your loses.

You would have signed an advisory agreement allowing them to do that and neither of those two companies engage in margin trading on client accounts in their advisory arms. Otherwise, just having a self directed account at the big firms doesn’t allow them to do any of that or exert any other type of control of what you invest in with your account (unless it’s restricting access to certain private investments), nor can they settle their debts with securities registered in your name.  If Fidelity or Schwab fail as companies and you own Apple stock in an account with them, you still own those shares whether Fidelity or Schwab cease to exist or not.

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