Experts Warn of Retirement Risks in Next Financial Crisis

Decades-old changes to securities laws could leave investors vulnerable when brokers fail

Mar. 21, 2026 at 10:30am

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Most Americans believe they directly own the stocks and other securities in their retirement accounts. However, changes to financial laws over the past few decades have shifted ownership to a complex indirect holding system, where investors hold contractual rights rather than direct ownership. Experts warn that this system could leave investors exposed to losses if a major brokerage firm fails during the next financial crisis, as the law prioritizes the claims of large institutional creditors over individual investors.

Why it matters

The shift to an indirect holding system for securities has occurred with little public awareness or scrutiny, despite the significant implications it could have for investors' assets in a crisis. This legal framework, enshrined in Article 8 of the Uniform Commercial Code, was designed to protect large financial institutions rather than individual investors. As a result, ordinary Americans' reasonable expectations about owning their retirement assets may not align with the actual legal realities.

The details

In the modern securities system, most investors do not directly own the stocks, bonds, and other assets in their retirement accounts. Instead, these securities are held by the Depository Trust Company (DTC) and its nominee entity, Cede & Co. Investors hold 'security entitlements' - contractual claims against their brokers - rather than direct ownership. This shift was driven by powerful financial interests seeking to centralize ownership and reduce investor rights, often with little public scrutiny.

  • Decades ago, investors could hold securities in their own names, with physical certificates being common.
  • In the 1990s, lawmakers revised Article 8 of the Uniform Commercial Code to formalize the 'security entitlement' system, where investors hold claims against brokers rather than direct ownership.

The players

Depository Trust Company (DTC)

A subsidiary of the Depository Trust and Clearing Corporation, which is owned by the financial institutions that use it. DTC holds most securities through its nominee entity, Cede & Co., rather than individual investors.

Uniform Commercial Code

The state-law framework that governs securities ownership nationwide. Changes to Article 8 in the 1990s formalized the indirect holding system and priority rules that could leave individual investors vulnerable in a crisis.

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What they’re saying

“If Americans believe they directly own the assets in their retirement accounts, the law should reflect that expectation — before the next crisis tests it.”

— Justin Haskins, Author

What’s next

State legislatures could strengthen investor protections and clarify priority rules in the Uniform Commercial Code to better align the legal structure with ordinary Americans' reasonable expectations about owning their retirement assets.

The takeaway

The shift to an indirect holding system for securities, driven by powerful financial interests, has left individual investors vulnerable to potential losses in a future financial crisis, as the law prioritizes the claims of large institutional creditors over those of ordinary Americans who believe they own the assets in their retirement accounts.