SIPC (Securities Investor Protection Corporation)
SIPC is a nonprofit corporation that protects customers of failed broker-dealers by restoring securities and cash up to $500,000 per customer, including $250,000 for cash claims.
Exam Tip
SIPC = $500K total, $250K cash. Protects against FIRM FAILURE, NOT investment losses.
What is SIPC?
The Securities Investor Protection Corporation (SIPC) is a nonprofit membership corporation that protects investors if their brokerage firm fails. It does NOT protect against investment lossesâonly against broker-dealer failure.
SIPC Coverage Limits
| Coverage Type | Limit |
|---|---|
| Total Protection | $500,000 per customer |
| Cash Claims | $250,000 maximum |
| Securities | Included in $500,000 total |
What SIPC Protects
| Protected | NOT Protected |
|---|---|
| Stocks | Market losses |
| Bonds | Bad investment advice |
| Mutual funds | Commodities |
| CDs held at broker | Futures contracts |
| Cash at broker | Cryptocurrency |
| Fixed annuities | |
| Investment contracts not registered as securities |
How SIPC Works
- Brokerage firm fails
- SIPC steps in as trustee
- Transfers customer accounts to another broker
- Returns securities to customers
- Pays cash claims up to limits
SIPC vs. FDIC
| Feature | SIPC | FDIC |
|---|---|---|
| Protects | Brokerage accounts | Bank deposits |
| Coverage | $500,000 | $250,000 |
| Covers losses | No | No |
| Member type | Broker-dealers | Banks |
Important Notes
- SIPC coverage is per customer, per firm
- Joint accounts may have separate coverage
- Most broker-dealers are SIPC members
- Some firms carry additional "excess SIPC" insurance
Study This Term In
Related Terms
Broker-Dealer
GeneralA broker-dealer is a financial firm that buys and sells securities for its customers (broker) and for its own account (dealer), regulated by FINRA and the SEC.
FINRA
GeneralFINRA (Financial Industry Regulatory Authority) is a self-regulatory organization that oversees broker-dealers and their registered representatives, administering qualification exams and enforcing securities rules.
SEC (Securities and Exchange Commission)
GeneralThe SEC is the U.S. federal agency responsible for enforcing securities laws, regulating securities markets, and protecting investors from fraud and market manipulation.