What is the Securities Investor Protection Act of 1970? | Toppan Merrill (2024)

What is the Securities Investor Protection Act of 1970?

The Securities Investors Protection Act of 1970 amended the Securities Exchange Act of 1934 and authorized the creation of the Securities Investor Protection Corporation (SIPC). Sponsored by the U.S. government, the SIPC is a non-profit, independent corporation that requires the membership of most registered brokers and dealers under the Securities Exchange Act of 1934.

Enacted in 1970, the Securities Investors Protection Act, or SIPA, was intended to build public confidence in securities markets by covering customers for any broker-responsible losses or failures. The SIPC maintains funds which are intended to protect investors against brokers who misappropriate their funds, as well as pay them in the event that their broker or dealer goes bankrupt. The SIPC funds are made possible as a result of assessments paid to the SIPC by members based on the gross business they generate from the sale of securities.

The SIPC insures investors for up to $500,000 with cash claims limited to $250,000. This insurance program does not protect against losses due to market conditions. However, when a brokerage firm fails, the SIPC facilitates the transfer of accounts from the failed brokerage to a different member brokerage firm. If the transfer doesn’t go through, then the SIPC pays the investors for the market value of the lost shares or certificates for the stock, and the failed brokerage firm is liquidated. For support and additional information, explore our SEC reporting solutions.

What is the Securities Investor Protection Act of 1970? | Toppan Merrill (2024)
Top Articles
Latest Posts
Article information

Author: Corie Satterfield

Last Updated:

Views: 5934

Rating: 4.1 / 5 (42 voted)

Reviews: 89% of readers found this page helpful

Author information

Name: Corie Satterfield

Birthday: 1992-08-19

Address: 850 Benjamin Bridge, Dickinsonchester, CO 68572-0542

Phone: +26813599986666

Job: Sales Manager

Hobby: Table tennis, Soapmaking, Flower arranging, amateur radio, Rock climbing, scrapbook, Horseback riding

Introduction: My name is Corie Satterfield, I am a fancy, perfect, spotless, quaint, fantastic, funny, lucky person who loves writing and wants to share my knowledge and understanding with you.