IF YOU HOLD AN account with Lehman Brothers or Merrill Lynch, try not to panic.

In an act of desperation, Merrill agreed to sell itself to Bank of America on Sunday, just a matter of hours before the once-mighty Lehman filed for Chapter 11 bankruptcy protection on Monday. The news has shaken the U.S. financial system and markets, as well as the faith of customers who've invested their money through the firms.

But things aren't as bad as they may seem. If you hold an account with Lehman or Merrill, here's what you should know:

Leaving Lehman Isn't Necessary -- Yet

When it comes to Lehman, there is some good news (at least, relatively speaking): The firm's bankruptcy filing didn't include any of its broker-dealer subsidiaries, which are still up and running. So Lehman customers, including clients of its Neuberger Berman unit, can keep trading or "take other actions" with their accounts as usual. Presumably, this means you can call up Lehman and withdraw all your money from your brokerage account if you so choose. (We're waiting to hear back from Lehman to confirm this and will update this story as soon as possible.)

So, for the time being, regulators and consumer protection groups say your money at Lehman is safe, although what will specifically become of Lehman's brokerage businesses is up in the air. The Securities and Exchange Commission says it will oversee an "orderly transfer" of Lehman's customer assets to one or more SIPC-insured brokerage firms. (The Securities Investor Protection Corporation, or SIPC, maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms.)

Meanwhile, the SIPC says "it appears that all customer cash, stocks and other securities are accounted for" at Lehman.

"SIPC has not seen it necessary to take action with respect to any Lehman brokerage firm. The reason for that is the regulatory system works. Customer assets are segregated, intact and available for customers. Our job is to protect against missing assets, and as far as we and regulators know there are no missing customer assets," SIPC President Stephen Harbeck told us.

The SIPC doesn't guarantee brokerage accounts the way the FDIC insures deposits at commercial banks. It does, however, work to recover customers' assets when brokerages fail. If the SIPC has to step in this time, ideally, all of your stocks and bonds are transferred to another brokerage and you lose nothing. If Lehman were to run out of assets before all of its customers get all their securities back, SIPC's reserve fund would cover the rest of what each customer is owed, up to $500,000. While it's possible that amount still wouldn't be enough to cover the full tab for every customer, Harbeck says such a scenario is "very, very rare."

Merrill Money Is Safe

Those with brokerage accounts at Merrill Lynch can breathe a sigh of relief. It's a far simpler -- and better -- situation than Lehman's. Once the Bank of America deal goes through, clients will be part of the world's No. 1 securities brokerage, with more than 20,000 advisors and $2.5 trillion in client assets. As a result, your Merrill money is actually safer today because of the deal.

Given that the acquisition of Merrill happened like a clap of thunder, however, it's understandable if account holders are unnerved. The deal was shockingly sudden and occurred under duress during a truly historic financial crisis. But for all the light and noise, it's really just a straight-up acquisition, something that happens all the time in the constant consolidation of the financial sector.

BofA saw a grand opportunity to buy a sprawling brokerage and wealth-advisory firm on the cheap, and it took it. Give Merrill some credit for seeing the writing on the wall. After what happened to Bear Stearns and Lehman, it was abundantly clear that being an independent broker/dealer was a losing proposition. And Merrill was the most likely candidate to fall next. For that, account holders should be grateful.

Of course, many of the details about what will happen once BofA closes the deal, are still hazy. BofA will most likely get rid of some of Merrill's 60,000 employees. So be prepared for the possibility that the familiar face of your personal broker or advisor could change. As for commission and fees, no details have been released yet (or will be for some time). Keep in mind that this deal isn't slated to close until 2009. So if you do decide to bail, you have plenty of time to assess your options.

Also See:
Mutual Funds Can't Avoid Latest Downturn
Riding Out the Storm
Bank Failures: Is Your Money Safe?