j.s. kim asks and then answers his own question at great length. he has reviewed the prospectus for slv (and gld) and concluded that they state clearly that they aren't required to own or hold any physical gold or silver and if you think they do, then it's your own fault if you buy these things and lose all of your money:

Conflicts of Interest Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)? Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV?

In fact, how is this situation any different than Goldman Sachs’s (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm’s own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house. Alice in Wonderland Prospectuses I have maintained for a long time now, ever since I carefully read the GLD and SLV prospectuses, that any investor that buys the GLD and the SLV and believes that these two investment vehicles are as risk-free and as sound as purchasing physical gold and physical silver is highly delusional. I call the prospectuses of the GLD and the SLV “Alice in Wonderland prospectuses” because it is literally impossible to ascertain what information contained within them is fact or fiction. Of course, investment advisers that sell their clients the SLV and GLD depend upon their customers not reading the prospectuses, or perhaps even reading them, but not understanding them.

http://seekingalpha.com/article/149209-are-gld-and-slv-legitimate-investment-vehicles