Securities Investor Protection Corporation (SIPC)
What Is the Securities Investor Protection Corporation (SIPC)?
The Securities Investor Protection Corporation (SIPC) is a nonprofit organization created by federal law to help protect customers if a brokerage firm fails financially and customer assets are missing. SIPC protection applies to eligible securities and cash held in a brokerage account.
SIPC does not protect investors from market losses. Instead, it helps return customer property when a brokerage firm goes out of business.
Why It Matters
Many people assume all financial accounts are protected in the same way, but brokerage accounts work differently from bank accounts. SIPC helps provide a layer of protection if a brokerage firm collapses and customer assets cannot be fully accounted for.
Understanding SIPC helps investors know what protections exist and what risks still remain.
How SIPC Works
If a SIPC-member brokerage firm fails, SIPC may step in to help recover customer assets.
Protection generally covers:
- missing stocks, bonds, and other eligible securities
- limited cash held in the brokerage account
- account transfers or liquidation proceedings
SIPC protection has coverage limits, including a limit for cash claims.
Example
If a brokerage firm fails and customer shares are missing from an account because of the firm’s collapse, SIPC may help recover those assets up to applicable limits.
SIPC vs FDIC Insurance
- SIPC protects eligible brokerage account assets if a brokerage fails.
- FDIC insurance protects bank deposits if a bank fails.
FAQs About SIPC
Does SIPC protect against investment losses?
No. SIPC does not cover losses caused by market declines.
Does every brokerage have SIPC protection?
Only brokerage firms that are SIPC members provide this protection.
Does SIPC cover cryptocurrency losses?
Generally, SIPC protection applies to eligible securities, not all digital assets.
Related Terms
