Safety

I copied partly here for easier reading:

Why account segregation doesn’t mean safety

Segregation is effectively an honour system, where the broker is expected to do the right thing and keep client and firm assets separate. In some cases, regulators and exchanges will be checking up on their holdings regularly, but obviously they can’t keep an eye on what’s in which account all the time.

So the system is open to fraud and abuse. If your stock broker decides to sell or move shares from nominee accounts, they will be able to do so.

And of course, fraud like this is most likely to happen when the firm is on the edge of collapse, needs cash or assets to meet its own liabilities and the temptation to ‘borrow’ client assets for a while to tide them over becomes too great – or simply when the management decides it’s time to loot client assets and retire somewhere with no extradition treaty.

So the point at which segregation is likely to offer no protection is just when you need it most.

It’s also worth being aware that even if there hasn’t been deliberate fraud, when a stock broker collapses its records often turn out to be shaky. So establishing which clients own what in the nominee account may take a lot of work and assets may sometimes turn out to have been misplaced in the turmoil.

So while the industry often presents segregation as the thing that guarantees the safety of your investments, it’s nothing of the kind. The safety it offers is limited and the system is close to being the absolute minimum that could be accepted, rather than added protection for investors.
As you should know, many people doing it does not mean it is safe. There is herd mentality also. And they do it for various reasons - convenience could be one of them. Or maybe those shares are pledged and the counter party do not want the owners to be able to transfer out freely?