Securities Law - Where Do Investors Stand?

[Martha]

As a little clarification on legalese for the non-lawyer types, replevin is a state court procedure to get possession of some asset that you are entitled to possess. For example, if someone steals your car from you, you are entitle to replevin the car. Or if you pledge the car as collateral for a loan and don't pay the loan, the creditor is entitle to replevin the car. Or, if your neighbor borrows your car and doesn't return it when they are supposed to return it, you are entitled to replevin your car.

Or as another example, say someone has possession of a stock certificate that belongs to you. If they do not have the right of possession, you could sue to replevin the stock certificate.

Replevin technically doesn't apply in the broker liquidation case because federal law and procedures will trump state law and state procedures.

[audreyh1]

Quote:

Originally Posted by emilylynn If the brokerage's relationship to a shareholder is merely that of a custodian, how is it that a brokerage can pledge investors' shares as collateral, or lend them out for short-selling?

You can instruct your broker NOT to make your shares available for short selling.

I once told Fidelity not to make my shares available, and they told me that they already weren't. They said that only if I open a margin account might my shares become available for short selling.

I guess each broker has different policies, but I suspect as you have control over your shares you just have to make your wishes known.

Audrey

[FinanceDude]

No brokerage firm I know of in America can make a client's stock positions available for short selling without a margin agreement........most compliance departments have strict rules on this........

[emilylynn]

These have been great responses. Thanks, everyone.

I think it's time for me to go get a Gilbert's on Securities Law. Martha et al.--Remember Gilbert's?

One of the funniest memories of my career was the first day of a really big trial, when a team of about eight high-rollling attorneys on the other side of the case filed ominously into the courtroom. One of the younger attorneys set his impressively large briefcase down on counsel's table, where it promptly fell to the floor and popped open. It was completely empty except for a Gilbert's on Commercial Law. Needless to say, we had the edge after that little fiasco.