Mutual fund share protection
Recently "Moneywise" explained the protection available to investors through SIPC (Securities Investor Protection Corporation) when shares are held by a broker. Are mutual fund investors given similar protection when shares are held by the fund or its agent? O. B.
Completely different conditions exist for a mutual fund holding shares for an investor than when a broker holds shares in various companies for an investor. Certificates are relatively rare for holders of mutual fund shares. These interests are typically tracked with computerized accounts, and fractional shares are common.But, basically, shares held by a mutual fund for an investor are its own. If it should fail, the shares may be worthless -- an unlikely prospect. If a failing mutual fund is merged with another, not uncommon, investors in the former mutual fund will receive shares in the merged fund. The fund's shares are valued daily and reported at the net asset value.Thus, they are not similar to shares in different companies held by a broker and are not protected in the same manner a s SIPC protects individual investors.