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>Because you keep asking E* Trade :What Happens When a Brokerage Fails

>TheStreet.com
What Happens When a Brokerage Fails
Monday December 10, 6:20 am ET
ByPhilip van Doorn, TheStreet.com Ratings Bank Analyst

When headlines were screaming about problems at E*Trade’s bank unit, depositors weren’t the only ones unnerved. Word of the S&L’s home-equity loan exposure and writedown of asset-backed securities also sparked a run on E*Trade’s discount brokerage accounts. E*Trade stated that investors pulled a net $7 billion from both bank and brokerage accounts month to date, through Nov. 27.
Judging from reader questions, there’s a lot of confusion about what the bank’s problems mean for E*Trade’s brokerage customers and the risks associated with the failure of a brokerage firm.

Bank Failures
If a broker-held bank were in danger of failing, its regulator would probably try to help avoid a failure by encouraging a sale to a larger, strongly capitalized institution. This would avoid a failure, so no depositors (insured or otherwise) would be hurt.

If the regulator were forced to close down the bank, the FDIC would then immediately pay off insured deposits, usually by transferring the balances to another bank overnight. Uninsured depositors would later be paid a “dividend” to recover a portion of their uninsured deposits.

For example, when NetBank failed, depositors were immediately paid a dividend of 50 cents on the dollar for their uninsured balances, with the possibility of additional dividends as the FDIC sold off NetBank’s remaining assets.

Brokerage Firm Failures and SIPC Coverage

If a brokerage firm fails and securities are missing from customer accounts, the Securities Investor Protection Corporation, or SIPC, will ask a federal judge to appoint a trustee to oversee the liquidation of the firm’s assets and orderly transfer of customer accounts to other brokerage companies. The day of the SIPC’s request is called the “filing date.”

Investors may simply have their accounts transferred to another broker with no loss. In the event that securities or cash are missing from a brokerage account, investors have some protection from SIPC.

There are major differences between SIPC protection and FDIC protection. Unlike the FDIC, SIPC does not provide blanket protection for losses. The purpose of SIPC protection is to replace securities that are missing when a brokerage firm fails. It does not make up missing value for securities that may have lost market value while missing or for investments that the customer may feel he or she was ill-advised to make.

If you are missing 100 shares of IBM when your brokerage firm fails, SIPC will simply replace the 100 missing shares, regardless of whether they have gone up or down in value since they went missing.

Eligibility and Coverage Limits
It is important to make sure that your broker is a member of SIPC. The words “Member Securities Investor Protection Corporation,” or “Member SIPC” will appear on signs at brokerage offices and on websites or advertisements for most brokers. If you are not sure, go to SIPC’s Web site to check.

Both cash and securities are covered, with a limit of $500,000 in value as of the filing date, including a $100,000 limit for missing cash. However, some types of investments are not covered, including commodity and currency futures contracts, unregistered investment contracts and annuity contracts.

Most investors are eligible for SIPC protection. Those that are ineligible include officers, general partners and directors of a failed brokerage firm, and brokers, dealers or banks acting on their own behalf, rather than for their customers. You should visit SIPC’s Web site for a full list of the rules on eligibility and coverage.

SIPC Coverage for Money Market Funds
This is an area that can easily cause confusion. Many investors consider money market balances held at brokerage accounts as “cash.” But a money market fund is actually a mutual fund that seeks to keep its share price fixed at $1.

The companies that manage these funds may or may not be affiliated with your brokerage. Money market funds hold short-term debt instruments, such as Treasury bills, commercial paper, certificates of deposit and other securities with maturities usually averaging about 90 days.

Because of the short maturities and generally liquid nature of these securities, it is very rare for a money market funds to “break the buck,” or fall below $1 a share, which could lead to investor losses. When this has happened, fund managers have usually stepped in and supported the $1 price with their own money, but this has not always been the case.

So while investors often think of money market funds as safe alternatives to bank accounts, they are not insured by the FDIC or any other entity.

For SIPC purposes, shares in a money market fund are considered securities. SIPC protection may or may not apply to investments in money market mutual funds within your brokerage account. Whether or not your money market shares are covered depends on how your relationship with the money market fund is set up. There are two possibilities:

While the broker helped place your money in a money market fund, you have a separate relationship with the money market fund manager. This means you have your own money market fund account number and probably a checkbook and separate statement for the money fund. The company managing the money market fund “knows you.” In this case, if your broker fails, SIPC coverage does not apply to your money market fund, and is not even necessary, as you can contact the money fund manager directly to access your shares.
The broker has placed your cash in the money market fund on your behalf. This means that the money market fund “does not know you,” and that the broker is supposed to keep track of each of its customers’ shares in the money fund. In this case, if any of your money market shares are missing from your account when the broker fails, SIPC covers the money market shares as part of your coverage for missing securities, up to $500,000.
Filing Claims

If your broker fails and securities are missing from customer accounts, the trustee will send you a claim form and instructions with a deadline for placing a claim, which is usually 30 to 60 days from the filing date. You will need to supply proof of what the broker owes you, which shows how important it is to save your statements. If you receive or have access to electronic statements, save the electronic files and maintain printed copies as well. Most customers receive their property back within one to three months.

Again, you should visit the SIPC Web site for further information. There’s a much more detailed summary of how SIPC protection works. Among the other highlights is the Investor Survival Quiz. Take it. You may be surprised at your score!


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>Twas the month before Christmas

>

Twas the month before Christmas
When all through our land,
Not a Christian was praying
Nor taking a stand.
Why the Politically Correct Police had taken away,
The reason for Christmas – no one could say.
The children were told by their schools not to sing,
About Shepherds and Wise Men and Angels and things.
It might hurt people’s feelings, the teachers would
say
December 25th is just a “Holiday”.
Yet the shoppers were ready with cash, checks and
credit
Pushing folks down to the floor just to get it!
CDs from Madonna, an X BOX, an I-pod
Something was changing, something quite odd!
Retailers promoted Ramadan and Kwanzaa
In hopes to sell books by Franken & Fonda.
As Targets were hanging their trees upside down
At Lowe’s the word Christmas – was no where to be
found.
At K-Mart and Staples and Penny’s and Sears
You won’t hear the word Christmas; it won’t touch your
ears.
Inclusive, sensitive, Di-ver-si-ty
Are words that were used to intimidate me.
Now Daschle, Now Darden, Now Sharpton, Wolf Blitzen
On Boxer, on Rather, on Kerry, on Clinton!
At the top of the Senate, there arose such a clatter
To eliminate Jesus, in all public matter.
And we spoke not a word, as they took away our faith
Forbidden to speak of salvation and grace.
The true Gift of Christmas was exchanged and discarded
The reason for the season, stopped before it started.
So as you celebrate “Winter Break” under your “Dream
Tree”
Sipping your Starbucks, listen to me.
Choose your words carefully, choose what you say
Shout MERRY CHRISTMAS, not Happy Holiday!

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>Reader comments on VC meeting attendance…

>Overwhelming attendance at VC meetings is an inefficient and, often, unproductive way to convey a group’s position. It is a visable show of force from those who attend, which may be 50-100 people, at the most. That looks like a “landslide” at a public meeting. But, what if those are are the ONLY 50-100 people who support a particular view in a village with over 8,000 households? Not very substantial support!

No…trying to create the perception of support by stuffing the room at a VC meeting is a crude, unsophisticated and brutish attempt to intimidate the village into the group’s way of thinking. Occasionally, this leads to rude and inappropriate shouting matches. It ALWAYS leads to an inefficient use of everyone’s time, as a long parade of the “usual suspects” take more than their allotted time at the podium, often with outdated or incorrect so-called “facts” to support their case. Without supporting or criticizing their positions, I point to the residents who oppose the Master Plan proposals at Grove Park or the “anti-turf” residents, like Linda & Katie McNamara, as notable examples, in the past year, of members of groups who have repeatedly shown up en masse to meetings and often attempt to “shout down” opposition. Because one or two members of the VC are concerned about being “politically correct”, this tactic is sometimes effective with those VC members.

Ironically, groups with logic and the facts on their side generally do not feel the need to resort to these tactics and are typically more persuasive, as a result of their less antagonistic approach. Thus, a far more effective method of communication is to have thoughtful, factual and, sometimes, lengthy direct conversations with individual members of the VC and other community leaders on a frequent basis and long before a public meeting takes place. If it is necessary to demonstrate widespread community support for or against a project, then petitions with names and addresses of supporters can be presented and highlighted at meetings and in the press.

I am not saying that deals should get done in “shady back room negotiations”, as the conspiracy theorists on this blog incorrectly suggested happens so often. I am simply saying that, in my experience, if groups and individuals are willing to engage in thoughtful discourse with appropriate village leaders and can present factual and compelling rationale for their case, there is no need to make a “spectacle” at public meetings. It is an issue of building consensus among the VC members, who will ultimately cast the votes. This might actually lead to far more productive and effective village governance, since things might actually get accomplished without the need for multiple meetings to rehash the same topics month after month.

This post will not be popular with those on this blog who like to “stir the pot” of public emotion for the sake of a reaction. But, it is sage advice that might help to improve our democratic process of government in Ridgewood.

Match.com

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>The Ridgewood Chamber of Commerce invites you to

>

The Ridgewood Chamber of Commerce invites you to browse our shops, enjoy one of our many fine restaurants, visit our local professional members and do business in Ridgewood.

FREE Gift Wrapping at Bookends

232 East Ridgewood Ave.

Ridgewood’s gift to you is…
Free Parking on all four Saturdays before Christmas
Free Old Fashion Trolley Ridge for your shopping convenience
Free* gift wrapping with purchases made in Ridgewood
And the finest
Shopping and Dining in Bergen County during the Holidays
For more information call 201-445-2600

Santa House Hours

Saturday, December 8, 15, 22 , 2007 10:00 a.m. – 3:00 p.m.
Monday, December 24, 2007 10:00 a.m. – 2:00 p.m.

Trolley Hours

East side to West side
Saturday, December1, 2007 10:00 a.m. to 4:00 p.m.
(Trolley will be parked in front of Van Neste Park from 4:00 p.m. to 9:00 p.m.)
Saturday, December 8, 15, 22, 2007 10:00 a.m. to 9:00 p.m.

GIFT WRAPPING AT BOOKENDS
232 E. RIDGEWOOD AVENUE

(* – with Ridgewood Merchant receipt!!!)
Courtesy Ridgewood Chamber of Commerce)

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>U.S. Students Lag In Science, Math On International Test

>courant.com/news/education/hc-science1205.artdec05,0,7504648.story

Courant.com
U.S. Students Lag In Science, Math On International Test
Washington Post

December 5, 2007

WASHINGTON —

American teenagers have less mastery of science and mathematics than peers in many industrialized nations, according to scores on a major international exam released Tuesday.

Education experts say results of the 2006 Program for International Student Assessment highlight the need for changes in classrooms and in the federal No Child Left Behind law. The average science score of U.S. 15-year-olds lagged that of students in 16 of 30 countries in the Organization for Economic Cooperation and Development, a Paris-based group that represents the world’s richest countries. U.S. students were further behind in math, trailing counterparts in 23 countries.

“How are our children going to be able to compete with the children of the world? The answer is not well,” said former Colorado Gov. Roy Romer, who is chairman of Strong American Schools, a nonpartisan group seeking to make education prominent in the 2008 presidential election.

The PISA test, given every three years, measures the ability of 15-year-olds to answer math and science problems. About 400,000 students, including 5,600 in the United States, took the 2006 exam.

There is also a reading portion, but the results for U.S. students were thrown out because the tests were printed incorrectly.

Students in Finland earned top scores in science and math. Mexico was at the bottom of the pack.

The PISA results underscore concern in some quarters that too few U.S. students are prepared to become engineers, scientists and physicians and that the nation may lose ground to economic competitors.

An expert panel appointed last year by President Bush is preparing to recommend ways to improve public school math instruction, with a focus on algebra.

PISA, first administered in 2000, covers reading, math and science, but each time the test is given it focuses in depth on one subject.

Last year’s exam spotlighted science.

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>NOTICE: Impaired Driving Enforcement Campaign – December 7, 2007 through January 2, 2008

>

Ridgewood’s Police Department will participate in the Statewide “Over the Limit, Under Arrest” impaired driving enforcement campaign between December 7, 2007, and January 2, 2008. The program is designed to raise awareness about the dangers of drinking and driving through high-visibility enforcement and to arrest motorists who choose to drive while impaired by either drugs or alcohol.

Law enforcement agencies recommend:

1) Be responsible and don’t risk it…you will be caught
2) If you plan to drink, choose a designated driver before going out
3) Realize before going out that every drink you have makes it more difficult to know when you’ve had too much to drive
4) Take a taxicab or ask a sober friend to drive you home
5) Spend the night where the activity is held
6) Report impaired drivers to law enforcement
7) Always buckle up – it’s your best defense against an impaired driver.

Ridgewood Police Chief William M. Corcoran and his officers wish everyone a safe and happy holiday season.

1-800-PetMeds Banner July 468x60

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>Readers Want to Know ….

>I would be interested to know precisely what Interim Superintendent Brennan means by the term “the people who are the consumers of this product”. For example, does he presume to dilute the well-documented, well-articulated, and by now urgent needs of parents and taxpayers by blending those needs together with what he and the district would like to think are the “needs” of students that like to learn math by playing games, writing sentences and themes, and displaying their artistic skills? If it is not his intent to take the time between now and September 2008 to talk district parents and taxpayers out of their distaste for reform math, or to do an end run around the problem, then he may have bought himself some good will with his full statement to the board.

As I heard his statement, it had a bit of an edge to it. He indicates that, based on his review of the historical record, the long drift or transition toward the implementation of reform math curricula and materials that started a decade or so ago appears to have taken place in the absence of any specific actions, deliberative processes, or official decisions undertaken by the Board. This buttresses the negligence argument that many on this blog have been raising.

The kicker, though, comes in the last ten seconds of this video. Ms. Brogan’s feeble, almost fearful, response to Mr. Brennan’s statement is embarassing, and reveals her emotions-based, fact-allergic style of non-analysis. At this point, I’d just as soon she politely remove herself from the debate, and start planning what she’s going to do with the extra free time she will soon have on weekday evenings.

3balls Golf

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Council Nixes Downtown Security Camera Proposal – Bolger’s $450K Gift Snubbed by 3 vs. 2 Vote

>

Citing conflicting and inconclusive crime statistics provided by Police Chief William M. Corcoran, Village Council members last night flatly rejected a proposal to install closed circuit television surveillance cameras throughout the central business district. Local philanthropist David Bolger had agreed to fund the controversial project.

Opposed: Harlow, Ringler-Shagin, and Wiest. For: Mancuso and Pfund.

CCS.com

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>Traditional Math Means Never Having to Say You’re Sorry (Barry Garelick)

>Last year at a meeting of the National Mathematics Advisory Panel (a Presidential appointed panel charged with drafting recommendations on how best to prepare students for algebra), a woman named Sherry Fraser read a statement into the public record which began as follows:

“How many of you remember your high school algebra? Close your eyes and imagine your algebra class. Do you see students sitting in rows, listening to a teacher at the front of the room, writing on the chalkboard and demonstrating how to solve problems? Do you remember how boring and mindless it was? Research has shown this type of instruction to be largely ineffective.” (Fraser, 2006).

Such statement falls in the category of “Traditional math doesn’t work” or “The old way of teaching math was a mass failure,” heard early and often at school board meetings or other forums. I am always puzzled by these statements but Sherry’s was particularly vexing given that 1) I was not bored in my algebra classes, and 2) Sherry, like me, ended up majoring in math. So I contacted Sherry and asked what the research was that showed such methods to be “largely ineffective”. Sherry is co-director of a high school math text/curricula called IMP, developed in the early 90’s through grants from the NSF, totaling $11.6 million, to San Francisco State University. She replied to me in an email that she is a “firm believer in people doing their own research” and added that I wouldn’t have any trouble finding sources to confirm her statements. I have assumed she is just trying to be helpful by having me discover the answer myself, rather than just tell me the answer to my question. I have been a good student; here’s what my research shows:

From the 1940’s to the mid 1960’s, at a time when math and other subjects were taught in the traditional manner, scores in all subjects on the Iowa Tests of Basic Skills increased steadily. From 1965 to the mid-70’s there was a dramatic decline, and then scores increased again until 1990 when they reached an all-time high. Scores stayed relatively stable in the 90’s.

Conclusion No. 1: During the 40’s through the mid 60’s, something was working. And whatever was working, certainly wasn’t failing.

Those who decry traditional math generally advocate its reform, and promote the concept of discovery learning. Students supposedly discover what they need to know by being given “real life” problems, frequently without being given the procedures or the mastery of skills necessary to solve them. The reform approach is at the heart of a series of math texts funded through grants from the Education and Human Resources Division of National Science Foundation and based on standards developed by the National Council of Teachers of Mathematics (NCTM).

Long before NCTM’s release of its standards in 1989, math reformers of the 1920’s through the 1950’s had their say in how math should be taught. William A. Brownell, spoken well of by NCTM and various luminaries in today’s reform movement, was one of the key reformers of the early twentieth century and promoted what he called meaningful learning; i.e., teaching mathematics as a process, rather than a series of end products of isolated facts and procedures to be committed to memory.

If the above sounds like what the reformers are talking about today, it is because – like the complaints about education in general through the years – the complaints levied against how mathematics is taught have been perennial. What is often not mentioned when these complaints are replayed is 1) that there have also been perennial solutions and 2) some of these solutions have actually been effective.

The traditional math from the 40’s to mid-60’s was certainly not perfect. Also, it cannot be denied that in spite of the effort made in the texts to provide meaning to the student, some teachers did not follow the texts and insisted on a Thorndike-like approach that relied on rote memorization and math problems isolated from word problems. But neither the reformers nor the mathematicians of those times asked the teachers to teach math that way. Bad teaching was incidental to and independent of the textbooks used and the philosophy put forth by that era’s reformers.

Conclusion Number 2: Yesterday’s reformers sought the same goals as today’s reformers, except their textbooks actually contained explanations.

During the era of test score decline, many social issues emerged which may account for the downslide, such as increased drug use in the mid-60’s, permissiveness, increase in divorces and single family homes, and changes in the demographics of schools. Also, starting in the mid-60’s, many of the teachers of the older generation retired, making way for the newer cadre of reinvented John Deweys from the education schools.

The difference between traditional and present-day teaching is striking.

The emphasis is now on big concepts. These come at the expense of learning and mastering the basics.
Getting the right answer no longer matters.
In theory, it is student-centered inquiry-based learning. In practice it has become teacher-centered omission of instruction.
With the educational zeitgeist having been planted and taken root, the development of the NCTM standards in 1989 were an extension of a long progression. To top it all off, the reform approach to teaching math is being taught in education schools, thus providing future teachers with “work-arounds” to those few math textbooks that actually have merit.
Conclusion No. 3: While bad teaching was incidental to the traditional method in earlier days, it has now become an inherent part of how most math is taught today.

I hope my efforts provide something that Sherry Fraser can cite.

The above is taken from a 3-part article entitled “It Works for Me: An Exploration of Traditional Math,” published here at EdNews.org.

Barry Garelick is an analyst for the U.S. Environmental Protection Agency in Washington, D.C. He is a national advisor to NYC HOLD (www.nychold.com), an education advocacy organization that addresses mathematics education in schools throughout the United States.

http://www.edspresso.com/2007/11/traditional_math_means_never_h.htm

Comments
There’s an excellent point here:

Conclusion Number 2: Yesterday’s reformers sought the same goals as today’s reformers, except their textbooks actually contained explanations.

By and large, the goal of educators throughout history has probably been the same. We all want our students to achieve at their fullest potential. We must be careful not to “throw the baby out with the bath water” as we implement new “research” based strategies.

I haven’t conducted formal research, but I’ve noticed a trend in my student population over the past few years. The students who struggle with Algebra almost all struggle with basic mathematical concepts. Many of these early teens cannot multiply one-digit numbers without a calculator. I think that these students have developed too much reliance on calculators to solve math problems. When they reach Algebra, the calculator can no longer replace mathematical reasoning.