SIPC - What is SIPC? (2024)

FAQs

What is SIPC and how does it work? ›

The Securities Investor Protection Corporation (SIPC) protects customers if their brokerage firm fails. Brokerage firm failures are rare. If it happens, SIPC protects the securities and cash in your brokerage account up to $500,000.

The SIPC is not better or worse than the FDIC, but it is different. The SIPC is a nonprofit with one goal: to restore securities to investors when brokerage firms fail. Impacted investors need to file a claim before the deadline, and unlike FDIC-insured accounts, the reimbursem*nt process is not automatic.

All registered brokers or dealers are SIPC members by law, with some exceptions. Address information is provided as a convenience and often reflects the member's business mailing address and not necessarily the retail office or location.

Although not every investor or transaction is protected by SIPC, no fewer than 99 percent of persons who are eligible get their investments back with the help of SIPC.

They must also have a certain amount of liquidity on hand, thus allowing them to cover funds in these cases. What this means is that even if you have more than $500,000 in one brokerage account, chances are high that you won't lose any of your money even if the broker is forced into liquidation.

Once you sign and return to the Trustee the required documentation, your claim will be satisfied by the payment of cash or delivery of securities to you, up to at least the SIPC limits.

SIPC protects stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds and certain other investments as "securities." SIPC does not protect commodity futures contracts (unless held in a special portfolio margining account), or foreign exchange trades, or investment contracts ...

SIPC insurance doesn't cover ...

Investment losses or worthless stocks or other securities. Losses due to account hacking, unless the firm was forced into liquidation due to the hack. Claims against bad or inappropriate investment advice.

FDIC insurance automatically covers deposits up to $250,000 per depositor, per institution, for each account ownership category. These categories include checking accounts, savings accounts, money market accounts and certificates of deposit (CDs).

With SIPC and FDIC insurance, one isn't necessarily better than the other since they both protect you in different ways. If you have bank accounts or brokerage accounts, having both types of coverage can help you feel reassured about the safety of your savings or investments.

Is the SIPC backed by the US government? ›

SIPC was not chartered by Congress to combat fraud. Although created under a federal law, SIPC is not an agency or establishment of the United States Government, and it has no authority to investigate or regulate its member broker-dealers.

Securities in your brokerage account are held in custody by Vanguard Brokerage, a division of Vanguard Marketing Corporation (VMC). VMC is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).

While bank balances are insured by the FDIC, investments in a brokerage account are covered by the Securities Investor Protection Corporation (SIPC). It protects investors in the unlikely event that their brokerage firm fails.

Organization. SIPC is led by seven directors, five appointed by the President of the United States with the advice and consent of the United States Senate, one by the United States Department of the Treasury, and one by the Federal Reserve.

SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash.

SIPC protection of customers with multiple accounts is determined by "separate capacity." Each separate capacity is protected up to $500,000 for securities and cash (including a $250,000 limit for cash only). Accounts held in the same capacity are combined for purposes of the SIPC protection limits.

Up to $500,000 per customer, which includes a maximum $250,000 of cash coverage. For customers with multiple accounts, protection is determined by whether those accounts are of separate capacity. Securities Investor Protection Corporation. What SIPC Protects.

SIPC protection is not available with respect to fixed annuities and is limited with respect to claims for variable annuity contracts. SIPC does not protect against the risk of default by the issuer of a variable annuity contract (usually an insurance company) and does not protect the value of the annuity contract.