RetireJapan

Hi,

Japanese brokerages are supposed to keep our investments separate from their own funds so that that our holdings don't disappear or take a haircut in a bankruptcy.

For cases when the brokerage doesn't, we have up to 10 million yen protection, a bit like the 10 million yen bank deposit protection.
https://jipf.or.jp/en/introduction/index.html

Do you try to keep below this 10 million yen protection cap by having multiple brokerage accounts?

I plan to max out the new NISA and will go over that limit before long in my Rakuten account.
I use other brokerages but middle name issues and the way each brokerage treats them could create hassle when transferring the NISA account.

There haven't been any brokerage bankruptcies where this happened for a long time but history is no guarantee of the future.

It is easy to dismiss the risk as the probability is very small. However, the consequences would be heavy.

I am wondering if the people who dismiss this risk have actually gone over the limit, and not bothered to shift assets to another brokerage?

Diversifying cyber risk is another consideration.

It's a very good question. My wife and I have the bulk of our investments in Rakuten (a few multiples of the guarantee limit). Our iDeCo accounts are with SBI and Rakuten, but these are administed by JIS&T so I don't think they would be affected by a broker failure.

I considered switching to Monex for new NISA, but didn't get round to it. Will reconsider this week.

Anyone else?

RetireJapan wrote: ↑Fri Dec 15, 2023 2:20 am It's a very good question. My wife and I have the bulk of our investments in Rakuten (a few multiples of the guarantee limit). Our iDeCo accounts are with SBI and Rakuten, but these are administed by JIS&T so I don't think they would be affected by a broker failure.

I considered switching to Monex for new NISA, but didn't get round to it. Will reconsider this week.

Anyone else?

All my holdings, IDeco, Nisa Classic, and new Nisa are with Rakuten.

Post-New Nisa, I will move my future taxable purchases to SBI.

As my Tsumitate Nisa purchases mature into my Rakuten taxable, I will sell them and rebuy them in SBI. It is better to have only 1 taxable account.

Future Plan
Nisa/Ideco -> Rakuten
Taxable Account -> SBI

(If IBJP has a tax-reporting account by 2040 I will move with them)

ToushiTime wrote: ↑Fri Dec 15, 2023 2:07 am … so that that our holdings don't disappear or take a haircut in a bankruptcy.
…
There haven't been any brokerage bankruptcies where this happened for a long time but history is no guarantee of the future.

As I think we are talking about shares or units of mutual funds I’m not understanding the concern maybe. You acknowledge that brokerages have a duty to keep customer accounts separately from the firms own accounts.

So your concern must be the brokerage is an illegal Ponzi scheme with falsified accounting.
This is why I use SBI and Rakuten.
You see. I watched “wizard of lies” staring De Niro as Bernie Madoff a while back. And I can say with some confidence that in all my dealings with the stellar cast of SBI and Rakuten I’m yet to meet a single person with an ounce of the guile, charm or intelligence Mr Madoff possessed. It’s unfathomable to me that a firm so viscerally reluctant to take me as a customer would in fact be a mere facade to some nefarious source of ill gotten wealth..

The statements, hopefully not falsified, you receive each year show your holdings and they are in your name not the brokers name.
Best practice is to keep some offline copies for additional peace of mind..
Ponzi schemes aside, the only impact in the event of a collapse is time to unravel and get your holdings reflected in another broker.
For this reason I’m not at all bothered. That said. I do use three brokers. But that’s just because I’m sure SBI and Rakuten live moments away from an extended outage due to ineptness.

I use multiple brokerages because of the risk of identity theft or being unable to access an account for an extended period due to the variety of misunderstandings about proving my identity (having had to argue with banks and other financial firms here that would tell me my name was not my name or that my signature was not really my signature). I don't spend any effort worrying that the brokerage is going to break the rules about having customer assets separate from their own assets; that segregated account rule is a very strong protection. I think it would be impractical to open a new brokerage account every time you reach 10 million yen in assets.

Moneymatters wrote: ↑Fri Dec 15, 2023 3:16 am
The statements, hopefully not falsified, you receive each year show your holdings and they are in your name not the brokers name.
Best practice is to keep some offline copies for additional peace of mind..

Yes, I guess that is what it boils down to. Brokerages falsifying share ownership records. As I understand it, that's a bit different to typical Ponzi schemes where the firm robs Peter of his cash contributions to pay Paul his returns. I don't see what the point of falsifying ownership records would be, given that most of my assets are investment trusts that can't be traded anyway i.e. the brokerage couldn't use them in its own trading account.

The 10m protection only applies to the brokerage and individual stocks (I think), not the trust banks such as Mitsubishi UFJ Trust and Banking Corporation in the case of MUFJ Kokusai Asset Management's eMaxis Slim funds. The trust banks actually hold the stocks within the mutual funds. I guess they could falsify the ownership records too, but I cannot imagine why they would.

Just thinking out loud here I'll spread my assets around a bit but won't make that much effort to do so.

Good idea about saving a PDF of the annual share ownership statement. I'll look for that.

TokyoWart wrote: ↑Fri Dec 15, 2023 3:51 am being unable to access an account for an extended period due to the variety of misunderstandings about proving my identity (having had to argue with banks and other financial firms here that would tell me my name was not my name or that my signature was not really my signature).

Yes, that is a potential problem for me too given all the name BS.
As far as I know, these online brokerages don't have branches we can walk into with our zairyu card and MyNumber card in hand...

TokyoWart wrote: ↑Fri Dec 15, 2023 3:51 am I use multiple brokerages because of the risk of identity theft or being unable to access an account for an extended period due to the variety of misunderstandings about proving my identity (having had to argue with banks and other financial firms here that would tell me my name was not my name or that my signature was not really my signature). I don't spend any effort worrying that the brokerage is going to break the rules about having customer assets separate from their own assets; that segregated account rule is a very strong protection. I think it would be impractical to open a new brokerage account every time you reach 10 million yen in assets.

Hear, hear. Every time I get an email from Rakuten Shoken addressed to someone who has a drastically shortened version of my name written in full width romaji I wonder why on earth I have so much money parked under a pseudonym of convenience at a broker that is so incompetent that any foreign name over 8 characters causes the entire system to break.

Previous discussions

https://www.retirejapan.com/forum/viewtopic.php?t=1819

https://www.retirejapan.com/forum/viewtopic.php?t=2012

Thanks. Based on those two links, and a few others I found, the consensus seems to be:

1) the risk of a brokerage going bankrupt and not keeping our assets separate seems pretty negligible

2) the main issue, apart from cyber risk, would be having to wait for our assets to get transferred to another brokerage and possibly losing money as a result

*Disclaimer: just the impressions I got from reading those threads.