While the Securities and Futures Commission grants licences to intermediaries each year, some licensed intermediaries choose to cease operation for business reasons. In case our broker ceases operation, we should contact the broker immediately to get back our assets kept in the broker.
On hearing that the broker investors are using decided to close its operations, some investors may worry about losing all their investments. Although it is natural to feel anxious, there is no need to worry too much. The current regulation requires licensed intermediaries, including banks and brokers to protect their clients' assets properly. To do so, they need to open trust or client accounts with authorised institutions, such as banks, to hold and separate clients' assets.
If a broker plans to cease operation, it will usually give advance notice to its clients of the arrangement. This should include the services to be terminated, the procedures of asset withdrawal, the timetable and the fees involved. When we note that our broker will cease operation, we should provide our asset withdrawal instructions to the broker as early as possible, e.g. to transfer the money to our designated bank account. For stocks, we should consider transferring them to our accounts opened with another intermediary, which facilitates our subsequent stock trading and handling of corporate actions, including receiving dividends through that intermediary in the future.
If the broker could not reach us, or if we did not instruct the broker on asset handling in time, the broker may apply for payment of our assets into the court under the Trustee Ordinance. In that case, we may have to apply to the court to get our assets back and incur additional time and cost.
In addition, we should note the below two points:
- We should ensure that our personal particulars, such as contact numbers, correspondence and email addresses in the broker's record are up to date. It enables us to timely receive information and notices from the broker so that we can swiftly handle the assets in our investment accounts.
- We should always pay attention to records relating to our investment accounts, including checking and retaining the transaction documents and statements sent by the broker to us. In doing so, we can keep track of the status of our investment accounts, including trading activities, positions and holdings, and any other changes. Then, when we encounter the closure of our broker, we can know immediately how much cash and stock balances we have in our accounts.
