Safest Online Brokers


Are online brokerage firms safe in 2020? U.S. most secure, reliable, safest brokerage houses for investments, stock trading and IRA accounts.



List of Safe Online Brokers




Below is the list of reliable, safe online brokerage houses. All of them are U.S. government regulated. They are also members of SIPC and FINRA, and customer accounts are insured by SIPC for up to $500,000 including $250,000 cash: Ally Invest, TD Ameritrade, Charles Schwab, Etrade, Fidelity, Firstrade, Interactive Brokers, Merrill Edge, Motif Investing, Muriel Siebert, Sofi Invest, TIAA, Tradestation, USAA brokerage, Wealthfront, WellsTrade, Vanguard and Webull. You could see our ratings and read reviews of these companies here.


Most Reliable Brokerage Firms


-  TD Ameritrade. Everybody had heard about this firm: it's one of the largest, most reliable and safest online brokerage companies in the U.S. and it is very well run. The total client assets at the firm are over $1.3 trillion and the firm has over 11 million funded customer accounts.


Trusted online stock companies


TD Ameritrade offers stock/ETF commissions at $0 per trade. It is a good choice for a brokerage if you want the best trading platform or top selection of independent, third party investment research. The firm always offers an enticing promotional offer to attract new clients. Read full review of TD Ameritrade.


TD Ameritrade Promotion



Open TD Ameritrade Account






-  Ally Invest charges $0 per trade and has the best pricing among large brokerage houses. If you are new to investing, want the lowest cost, or looking for hands-off investing, then definitely check out this company. Read full review of Ally Invest.


Ally Invest Promotion




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How Safe Are Brokerage Firms?


If you’re wondering how safe it is to deposit thousands of dollars in a brokerage account and start buying stuff, you’re not alone. It’s perfectly reasonable to have concerns about the safety of investing, and many people have the same questions you do.

The short answer is that there are many safeguards in place, but investing has inherent risks that no one can eliminate. Here’s a slightly longer answer.


SIPC and Supplemental Insurance


The vast majority of brokerage firms in the United States are members of the Securities Investor Protection Corporation. Certainly all the big names are. Most of them are actually required by law to be members. To verify that your brokerage firm is a member of SIPC, just do a quick search on the organization’s member list.

SIPC’s primary job is to provide insurance for brokerage accounts. If your broker-dealer is a member of SIPC, your accounts are insured up to $500,000. Of this amount, $250,000 can be used for cash balances.

Some brokerage firms also provide supplemental insurance policies (these are not required by law) to cover anything SIPC does not. Known as “excess SIPC,” these policies can be found at brokers like Vanguard, Fidelity, and Schwab.


FINRA


On top of the insurance, broker-dealers in the United States are also regulated by the Financial Industry Regulatory Authority. FINRA keeps an eye on securities firms, publishes rules they must follow, and implements sanctions, including fines and suspensions, when brokers or their employees violate these rules.

FINRA manages BrokerCheck, an online portal that allows the public to check up on brokerage firms and see how many sanctions FINRA has imposed on them. A broker’s profile shows what organizations it is associated with, when it filed for registration, who’s in charge of the firm, and other details.


SEC and State Regulators


FINRA is a government-mandated private organization. It’s not a government agency, but there are government agencies that do their own part to keep the securities industry as safe as possible.

At the federal level, there is the Securities and Exchange Commission. The SEC has similar functions as FINRA. It is tasked with implementing rules for the industry and enforcing them.

If there is any criminal wrongdoing by a broker or one of its agents, the SEC steps in and files criminal charges. This assumes the brokerage house is registered at the federal level.

If not, a state securities commission steps up to the plate. Every state and the District of Columbia has one because not all broker-dealers are registered with the SEC. The big firms are, but smaller firms are usually registered at the state level. The state commissions perform the same types of functions as the SEC.


What Is Not Insured or Regulated


Despite all the oversight and regulation, not everything is regulated in the investment world. The most significant issue that is not insured or guaranteed by any entity is the market price of securities in your account.

To use an example, let’s say you buy 100 shares of Citigroup. The price could go to infinity or zero. There’s no guarantee there. If you pay $63 per share, that translates into a $6,300 investment. If the share price of C goes to $0, your investment goes to $0. No one insures against market loss. SIPC only guarantees the number of shares in your account, up to the market price.


Beware of Offshore Accounts


So far, we’ve been discussing American accounts only. Some brokers exist outside the United States; and these firms have different rules because they operate inside of different countries.

The Caribbean in particular is home to many brokers that offer day-trading and other investment services. Some of these companies may be loosely regulated and may have no insurance. For example, brokerage houses in St. Vincent and the Grenadines are not required to have a securities license. One broker on the island is F1Trade, Ltd., which has no insurance.


The Final Answer


To answer our original question, “How Safe Are Brokerage Firms?,” it appears that the answer is relatively safe, but not quite as safe as bank accounts. With bank deposits, the amount you put into the account is guaranteed. That’s not the case with investment accounts, and never will be.