SIPC - What SIPC Protects (2024)

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. Most customers of failed brokerage firms are protected when assets are missing from customer accounts. There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a SIPC member brokerage firm.

SIPC protection is limited. SIPC only protects the custody function of the broker dealer, which means that SIPC works to restore to customers their securities and cash that are in their accounts when the brokerage firm liquidation begins.

SIPC does not protect against the decline in value of your securities. SIPC does not protect individuals who are sold worthless stocks and other securities. SIPC does not protect against losses due to a broker's bad investment advice, or for recommending inappropriate investments.

It is important to recognize that SIPC protection is not the same as protection for your cash at a Federal Deposit Insurance Corporation (FDIC) insured banking institution because SIPC does not protect the value of any security.

Investments in the stock market are subject to fluctuations in market value. SIPC was not created to protect these risks. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investment falls for any reason. Instead, in a liquidation, SIPC replaces the missing stocks and other securities when it is possible to do so.

How Is My Cash Protected

SIPC protects cash in a brokerage firm account from the sale of or for the purchase of securities. Cash held in connection with a commodities trade is not protected by SIPC. Money market mutual funds, often thought of as cash, are protected as securities by SIPC. SIPC protects cash held by the broker for customers in connection with the customers’ purchase or sale of securities whether the cash is in U.S. dollars or denominated in non-U.S. dollar currency.

What Are Securities

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 (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

For a more detailed explanation, consult the definition of “security” in the Securities Investor Protection Act, section 78lll(14):

The term “Security” means any

  • note,
  • stock,
  • treasury stock,
  • bond,
  • debenture,
  • evidence of indebtedness,
  • any collateral trust certificate, preorganization certificate or subscription,
  • transferable share,
  • voting trust certificate,
  • certificate of deposit
  • certificate of deposit for a security, or
  • any security future as that term is defined in section 78c(a)(55)(A) of this title,
  • any investment contract or certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or mineral royalty or lease (if such investment contract or interest is the subject of a registration statement with the Commission pursuant to the provisions of the Securities Act of 1933 [15 U.S.C. 77a et seq.]),
  • any put, call, straddle, option, or privilege on any security, or group or index of securities (including any interest therein or based on the value thereof), or
  • any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency,
  • any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase or sell any of the foregoing, and
  • any other instrument commonly known as a security.

Except as specifically provided above, the term “security” does not include any

  • currency, or
  • any commodity or related contract or futures contract, or
  • any warrant or right to subscribe to or purchase or sell any of the foregoing.
SIPC - What SIPC Protects (2024)

FAQs

SIPC - What SIPC Protects? ›

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 ...

What does SIPC protect from? ›

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.

Is it safe to keep more than $500,000 in one brokerage account? ›

The Securities Investor Protection Corporation's account insurance protects up to $500,000 per brokerage account, which is important because "if a brokerage firm or custodian fails, these funds are restored in the account, regardless of if the brokerage company or custodian is defunct," says Steven Conners, founder and ...

What happens if a customer exceeds SIPC limits? ›

If your claim is over the limits of SIPC protection, you will share in customer property equally with all other customers, and if after having had your claim satisfied out of SIPC advances and receiving your share of customer property, your claim still is not fully satisfied, you will be eligible to receive a ...

How much does SIPC cover for beneficiaries? ›

That protection is limited to the amounts available with respect to a single account, however; i.e., an overall limit of $500,000, of which no more than $250,000 may be for cash. SIPC protection is not available separately for the individual beneficiaries of the pension fund.

Are retirement accounts protected by SIPC? ›

This means if you own a traditional IRA and a Roth IRA, SIPC insures those separately and you will be insured for up to $1 million for the two accounts at a SIPC-member broker-dealer.

What is SIPC coverage per account example? ›

SIPC coverage insures people for up to a limit of $500,000 in cash and securities per account. SIPC protections also include up to $250,000 in cash coverage. The total amount of SIPC coverage is $500,000; thus, if you have $500,000 in securities and $250,000 in cash, that entire amount may not be covered.

Is it bad to have 3 brokerage accounts? ›

Just as diversifying your investment portfolio across different asset classes mitigates risk, having accounts at multiple brokerage firms can provide a form of diversification. It ensures that your assets are not concentrated in one place, reducing the impact of potential issues with a single broker.

Where do billionaires keep their money? ›

Common types of securities include bonds, stocks and funds (mutual and exchange-traded). Funds and stocks are the bread-and-butter of investment portfolios. Billionaires use these investments to ensure their money grows steadily.

Should I keep all my money in a brokerage account? ›

If you've got a large chunk of cash, you might secure better returns outside of a brokerage account. You could lose money. If your money is swept into a money market fund, that cash won't be insured by the FDIC or SIPC. It's possible to lose money.

Does Charles Schwab have excess SIPC coverage? ›

Schwab's excess SIPC program has a $600 million aggregate in coverage. The regulations in place to ensure your assets are not commingled with Schwab's, as well as the different insurance protections available, should offer peace of mind.

Has SIPC insurance ever been used? ›

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.

What is not covered by SIPC? ›

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 ...

Why should no one use brokerage accounts? ›

If the value of your investments drops too far, you might struggle to repay the money you owe the brokerage. Should your account be sent to collections, it could damage your credit score. You can avoid this risk by opening a cash account, which doesn't involve borrowing money.

Are SIPC limits per account or per person? ›

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).

How much does SIPC cover on a joint accounts? ›

. If, for example, you have an IRA account in your name and a joint account with your spouse, the SIPC treats them as separate accounts and insures each up to $500,000. (Unlike with FDIC coverage, joint accounts aren't insured to the full amount for each account holder with SIPC insurance.)

What SIPC doesn t cover? ›

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 ...

Which is safer FDIC or SIPC? ›

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 reimbursement process is not automatic.

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