Is my share trading account safe in Australia?

ASX describes two ways to register the legal title to listed shares. On the CHESS subregister, maintained by ASX Settlement, your holdings are recorded directly in your name and you are issued a HIN, which works like an account number for every listed investment you hold through that broker. This is often called a broker-sponsored holding. On an issuer sponsored subregister, the company's share registry records the holding in your name and gives you a Securityholder Reference Number (SRN) for each company.

The third arrangement is custodial. ASX's October 2024 brochure in its Getting Started in Investing series explains that under this model the holdings of many investors are pooled under one HIN attached to the custodian, usually the broker or a nominee of the broker. The custodian legally owns the investments, the custodian's name appears on the share register rather than yours, and your status is limited to beneficial ownership. ASX notes that discount brokers and robo platforms have made this structure more common, and that the platform's Product Disclosure Statement or other disclosure documents will say how investments are held.

Custodial does not mean unsafe. A licensed custodian has to keep client assets apart from its own, and the assets are not meant to be available to the firm's creditors. What changes is the path back to your shares if something goes wrong: with a HIN you can point to the register, while with a custodian you depend on the custodian's records and, if it fails, on an administrator working through them.

The collapse of Halifax Investment Services is the example Australians usually point to. ASIC's enforcement page records that voluntary administrators were appointed in November 2018 and that creditors resolved in March 2019 to put the firm into liquidation. Sorting out who owned what then went to a joint hearing of the Federal Court of Australia and the High Court of New Zealand in late 2020, and judgments on the valuation of investments and the return of shares and client money were handed down in May 2021.

That is two and a half years between administration and a court ruling on how to distribute client property. ASIC's page on the case also stresses that licensees must keep client money separate from their own, calling it an important safeguard for retail investors, and that breaching the client money provisions attracts criminal penalties. The safeguard exists, but untangling pooled records after a failure is slow, which is the practical reason many investors prefer their ASX shares on their own HIN.

ASIC, the Australian Securities and Investments Commission, licenses and supervises the firms. Anyone dealing in shares for retail clients needs an Australian Financial Services Licence (AFSL) or must act as an authorised representative of a licensee. ASIC's role is preventive: it sets conduct and client money obligations and can suspend or cancel a licence. With Halifax it did both, suspending the licence in January 2019 and cancelling it in January 2021.

A complaint against a licensee goes to the Australian Financial Complaints Authority (AFCA). If AFCA decides in your favour and the firm cannot pay, the Compensation Scheme of Last Resort (CSLR) may step in. The CSLR's own eligibility page lists dealing in securities for retail clients as a covered service, with foreign exchange, derivatives trading and managed investment schemes excluded. It also requires an unpaid AFCA determination and that you are not entitled to compensation under another statutory scheme.

The National Guarantee Fund (NGF), run by the Securities Exchanges Guarantee Corporation, is the closest thing Australia has to SIPC, and it is far narrower. Payments can be made only in the circumstances set out in the Corporations Regulations. The two that matter most to an ordinary investor are a loss from an unauthorised transfer of your securities, and property you entrusted to a market participant that then becomes insolvent and does not return it.

SEGC's Who Can Claim page sets the limits. A claimant can receive up to $1 million for claims relating to the same event and the same participant, and the cash component of that is capped at $250,000. The total across all heads of claim for one insolvent participant is $18 million, which is shared among every affected client. Claims must generally be served within six months of becoming aware of the loss or of the insolvency.

The Financial Claims Scheme (FCS) is a separate protection for cash. APRA says it covers deposits at Australian banks, building societies and credit unions up to $250,000 per account holder per institution, aggregated across all your accounts at that institution. Shares are not deposits and the FCS does not cover them. It matters for share traders because many brokers settle trades through a linked bank account, and cash sitting in that account at a bank is a deposit.

CommSec is Commonwealth Securities Limited, AFSL 238814. Its website describes it as a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia, which means the bank does not stand behind CommSec's obligations. The same disclosure says CommSec is a Market Participant of ASX and TMX Australia Exchange, a Clearing Participant of ASX Clear and a Settlement Participant of ASX Settlement.

ASX shares. CommSec's help centre says CHESS sponsorship is automatically applied to all newly opened CommSec Share Trading Accounts, and that sponsored shares are allocated a HIN by the broker. Your ASX holdings at CommSec are therefore registered in your own name. Accounts opened under older arrangements can be moved to CHESS sponsorship with a request form.

Cash. CommSec's online trading is commonly settled through the Commonwealth Direct Investment Account (CDIA). CommSec's site says the CDIA is issued by the Commonwealth Bank of Australia and administered by CommSec. Because the issuer is the bank, cash held there is a bank deposit, which is the kind of money APRA's Financial Claims Scheme covers, within its $250,000 limit per account holder per institution and combined with anything else you hold at CommBank.

International shares. These are not CHESS holdings, because CHESS only records ASX securities. CommSec's help page on where international shares are held says it has appointed Interactive Brokers LLC as its sub-custodian and international custodian, that assets are segregated in the name of CommSec Custodial Nominees Pty Limited, that Interactive Brokers is the legal owner, and that you keep beneficial ownership of everything in your account. The page describes CommSec as providing a nominee and custody service. It does not describe any compensation scheme for these holdings, so the specific protections that apply are a question to put to CommSec International Support.

Stakeshop Pty Ltd, trading as Stake, is an authorised representative (No. 1241398) of Stakeshop AFSL Pty Ltd, which holds Australian Financial Services Licence 548196. Stake's own page on the security of your assets sets out how each part of an account is held.

ASX shares. Stake says all Australian shares are registered under your unique HIN, and that the HIN verifies you are the legal owner. Its home page advertises CHESS sponsorship in the same terms: your own Holder Identification Number, with ASX shares held in your name.

US shares. Stake describes its Wall St offering as a custodian model. Your shares are held on your behalf by its US broker-dealer partner, DriveWealth, LLC, while you remain the beneficial owner. DriveWealth is registered with FINRA, is a member of SIPC, and uses sub-custodians such as the Depository Trust Company for US shares and the Bank of New York Mellon for US funds.

SIPC protects customers when a member brokerage firm fails. SIPC's own page puts the limit at $500,000, which includes a $250,000 limit for cash, and states there is no requirement to live in or be a citizen of the United States. Stake's page phrases the cash figure as an addition to the $500,000, so SIPC's wording is the one to rely on. SIPC does not protect against a decline in the value of your securities. Our guide What is SIPC insurance? goes through how a claim works.

Cash. Stake says Australian dollar funds are held in a segregated client trust account with a Big Four Australian bank, and that it holds Professional Indemnity Insurance cover in line with section 912B of the Corporations Act and ASIC Regulatory Guide 126.

On the ASX the two are set up the same way, which is the part most people asking this question care about. The differences are in the overseas shares and the cash. Both put US shares with a large American custodian under your beneficial ownership, through different firms and, in CommSec's case, through an Australian nominee as well.

• A share price falling, for any reason, including a company you own going into administration.
• Losses from a scam. Investment scams often borrow the names of real brokers, and a fake broker has no HIN, no AFSL and no client money obligations.
• Someone else logging into your account. Account security falls under the broker's terms and your own two-factor authentication, not the NGF or SIPC.
• Leveraged products such as CFDs and margin loans, where losses can exceed what you put in.
• Crypto, which sits outside both CHESS and the US securities custody chain.

1. Find your HIN

A CHESS holding statement or the broker's account details screen shows your HIN. If you can find one in your name for your ASX shares, those shares are registered to you. If the broker gives you only an account number and its PDS describes a custodian, the account is custodial.

2. Check the licence with ASIC

Note the AFSL number from the broker's site footer or Financial Services Guide and search it on ASIC's professional registers. For an authorised representative, check the representative number and confirm the licensee named matches.

3. Read who holds the overseas shares

For US or other overseas shares, find the custodian's legal name in the broker's disclosure and whether it is a member of a scheme such as SIPC. Note whether the account at the custodian is in your name or in a nominee's.

4. Work out where your cash sits

Cash in a bank deposit falls under APRA's Financial Claims Scheme up to $250,000 per institution. Cash in a client trust account relies on the trust and the client money rules. Cash in US dollars at a US custodian is in SIPC territory, if the custodian is a member.

Walnut is an AI investing app, not a broker, and it never holds your money or your shares. Everything stays at CommSec, Stake or wherever you hold it, under that firm's arrangements, whatever happens to Walnut.

Once you connect, Walnut reads your holdings, compares your portfolio with the S&P 500, gives a keep, trim or exit read on each position, and lets you ask the AI assistant about what you actually own. You can group holdings into baskets with target weights and see how far each one has moved from its targets. CommSec is connected read-only, so Walnut can analyze it but places no orders there. More on each broker is on the CommSec and Stake pages.

Walnut places orders only when you approve them, at Public and Robinhood (through a Robinhood Agentic account), and also at E*Trade, tastytrade, Webull (US and Canada), moomoo, Questrade, Wealthsimple, Trading 212 and Stake (Australia). Other brokers, including CommSec, Interactive Brokers, Fidelity and Schwab, are read in full. How the connection itself is secured is covered in Is Walnut safe?

"Australia has deposit insurance for shares." The Financial Claims Scheme covers bank deposits only. The NGF covers specific losses involving market participants, within capped amounts shared by every claimant.

"CommSec is owned by CommBank, so the bank guarantees it." CommSec describes itself as a non-guaranteed subsidiary. Your protection on ASX shares comes from the HIN in your name, not from the parent bank.

"CHESS sponsorship covers all my shares." CHESS records ASX securities only. US shares bought through an Australian app are held by a custodian, even at a broker that CHESS sponsors your ASX holdings.

"Custodial means my shares are at risk." A custodian has to keep client assets separate from its own. The real cost shows up after a failure, in how long it can take to get the assets back.

CHESS, issuer sponsored and custodial holdings: ASX, Getting Started in Investing, Part 2: Ways to invest (October 2024). NGF heads of claim and limits: SEGC, Who can claim. Deposit protection: APRA, Financial Claims Scheme: banks, building societies and credit unions. CSLR eligibility: CSLR, Who can make a claim. Halifax timeline and client money rules: ASIC, Halifax Investment Services Pty Ltd. CommSec licence, CDIA and market participant status: CommSec; CHESS sponsorship: CommSec FAQ; international custody: Where are my international shares held? Stake licence and CHESS: Stake; custody, SIPC and cash: Security of your assets with Stake. SIPC limits: SIPC, What SIPC protects. Walnut is not a registered investment adviser, and this guide is educational, not personalized financial advice.