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)


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 $500000 in a brokerage account? ›

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.

What is an example of SIPC coverage? ›

. 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 is the additional coverage for SIPC? ›

Excess SIPC insurance offers additional protection beyond the $500,000 limit, typically up to $25 million per account. Investors holding securities in extra SIPC insurance brokerage accounts can have greater peace of mind knowing their assets are protected in a catastrophic event.

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.

Is SIPC protection per account or per person? ›

Does each account have separate SIPC protection? Yes. SIPC protection is available in the liquidation of a SIPC-member brokerage firm under the Securities Investor Protection Act (SIPA).

What brokerage do most millionaires use? ›

Best Brokers for High Net Worth Individuals
  • Charles Schwab - Best for high net worth investors.
  • Merrill Edge - Best rewards program.
  • Fidelity - Best overall online broker.
  • Interactive Brokers - Great overall, best for professionals.
  • E*TRADE - Best web-based platform.
Mar 28, 2024

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.

Is it safe to have all your money in one brokerage? ›

Spreading your assets across different brokerage accounts can help protect you against potential fraud or unauthorized access, Roller says. If one broker has a breach, then you can still trade with another investment firm. The safety of your funds is also a concern.

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 reimbursem*nt process is not automatic.

Has SIPC 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.

Does SIPC cover multiple brokerage accounts? ›

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.

Does Schwab offer excess SIPC coverage? ›

Schwab maintains excess SIPC insurance protection for securities and cash up to an aggregate claim amount of US$600 million.

Can you have both FDIC and SIPC? ›

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.

Are 401k covered by SIPC? ›

For participants in defined contribution plans (e.g., 401(k)s, etc.), there is an added layer of protection through the Employee Retirement Income Security Act (ERISA). Given 401(k)s and the like are custodied at SIPC-member brokerage firms, they will have the previously mentioned protections.

Is money safe in brokerage account? ›

Cash Management Accounts

CMAs typically have lower fees when compared to traditional bank accounts. At the time of this writing, some have annual percentage yields (APYs) that top 4%. Money in a brokerage account is insured by the Securities Investor Protection Corp. (SIPC) for up to $500,000.

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