What happens if mutual funds are removed from broker?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
zmaqoptyxbglp
Posts: 121
Joined: Wed May 16, 2018 10:17 pm

What happens if mutual funds are removed from broker?

Post by zmaqoptyxbglp » Mon Jun 10, 2019 9:45 pm

Say I have an account at brokerage X that offers mutual fund Y, and they discontinue fund Y at brokerage X, but the fund itself is not liquidated. Also assume that I have several shares of fund Y at brokerage X. What happens in this case? Do my shares get liquidated? Can I reinvest dividends anymore? Can I buy new shares with new money?

123
Posts: 4701
Joined: Fri Oct 12, 2012 3:55 pm

Re: What happens if mutual funds are removed from broker?

Post by 123 » Mon Jun 10, 2019 9:53 pm

I think it will vary a great deal depending on the size of the brokerage you are dealing with. A large broker may continue to offer all options to existing shareholders. A small brokerage would probably allow you to keep your existing position but that's it, it might only allow you to receive dividends in cash. Beyond that there could be a wide variation. It would all depend on how broadly the fund is held across all the broker's accounts. The brokers know that if the service for a mutual fund is not adequate to holder's needs they could move their accounts elsewhere.

It costs the brokerage money to support each mutual fund in terms of customer service so if a fund is not very significant (from the broker's perspective) they could be welling to let that business go elsewhere.
The closest helping hand is at the end of your own arm.

User avatar
nisiprius
Advisory Board
Posts: 38269
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: What happens if mutual funds are removed from broker?

Post by nisiprius » Tue Jun 11, 2019 7:50 am

zmaqoptyxbglp wrote:
Mon Jun 10, 2019 9:45 pm
Say I have an account at brokerage X that offers mutual fund Y, and they discontinue fund Y at brokerage X, but the fund itself is not liquidated. Also assume that I have several shares of fund Y at brokerage X. What happens in this case? Do my shares get liquidated? Can I reinvest dividends anymore? Can I buy new shares with new money?
I don't think there are uniform rules. It happened to me once at Vanguard, years ago, with some MFS fund shares I was holding in Vanguard Brokerage Services. What happened then was that my shares were not liquidated, dividends continued to be reinvested, fund shares could be sold in the usual way--but new fund shares could not be bought with new money, and shares of the fund at another brokerage could not be transferred in and added to my holding.

In other words, not an urgent situation and no need to take prompt action.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Post Reply