Brokerage Bankruptcy? War? What Happens to Your Assets and How to Keep Them Safe

What happens to your assets if a brokerage suddenly goes bankrupt or a war breaks out? To give you the conclusion first, you don't need to worry too much! Even if a brokerage goes bankrupt, your domestic and overseas stocks are safely protected, and your cash deposits are also protected up to a certain amount. Of course, things can get a bit more difficult if a war breaks out.

So how can you keep your assets safe in situations like these? Let's go through it step by step. Read to the end to learn how to keep your precious assets safe!

What Happens to Domestic Stocks If a Brokerage Goes Bankrupt?

Domestic stocks are basically managed by an institution called the Korea Securities Depository (KSD). Because the KSD keeps customers' assets separate from the brokerage's own assets, your stocks are safe even if the brokerage goes bankrupt. If Brokerage A goes bankrupt, you can contact the KSD and transfer your stocks to Brokerage B.

What About Overseas Stocks?

Overseas stocks are protected on a similar principle to domestic stocks. Korean brokerages have contracts with custodians such as JP Morgan, BlackRock, and Citibank. So even if one brokerage goes bankrupt or shuts down, the stocks you hold are safe, and the overseas stocks kept with that custodian can be transferred elsewhere.

What About the Cash Deposits in My Brokerage Account?

Cash deposits refer to the cash you keep in your brokerage account without using it to buy stocks. Under the Depositor Protection Act, they are protected up to KRW 50 million. This limit is expected to be raised to KRW 100 million starting in 2025.

In other words, even if a brokerage goes bankrupt, you can get back the full amount as long as it is below the maximum protection limit. However, money held in a CMA or money market fund is not covered, so you need to be careful.

What Happens to My Assets If a War Breaks Out?

If something as serious as a war happens, rather than just a single brokerage going bankrupt, it's only natural to feel even more anxious about the assets you hold. However, the government has prepared measures in advance to keep financial assets safe even in crisis situations like this.

When a war breaks out, asset values can fluctuate sharply, but the assets held at the stock exchange and the Korea Securities Depository basically don't just disappear.

Once the war is over and daily life returns to normal, you'll still be able to access your assets reliably. That said, during wartime, trading hours may be changed or trading may be suspended.

To prepare for extreme situations such as a brokerage going bankrupt or a war breaking out, securing safe-haven assets like gold, Bitcoin, or cash is also one investment strategy worth considering.

How to Keep Your Assets Even Safer

So far, we've looked at what happens when a brokerage goes bankrupt or a war breaks out. In conclusion, your assets can be considered safe. However, your access to them may be restricted or blocked for a certain period, which could cause serious liquidity problems.

So it can be a good choice to spread your accounts across several brokerages and diversify your investments across different asset classes. Also, when bad news comes out about a brokerage, it's a good idea to check that company's financial soundness indicators and prepare whatever precautions you can in advance.