SipC

SIPC stands for the Securities Investor Protection Corporation, a United States nonprofit corporation created by Congress through the Securities Investor Protection Act of 1970 to protect customers of registered broker-dealers in the event of a firm's failure. It is not a government agency and is funded by annual assessments on SIPC-member broker-dealers, with a reserve used to meet customer claims and to facilitate the transfer of customer accounts to solvent firms when possible.

Coverage: SIPC protection is limited. For each customer at each SIPC-member broker-dealer, SIPC covers up to $500,000 in aggregate, of which up to $250,000 may be in cash. Coverage applies to securities and cash held by the broker-dealer for the customer at the time of the firm's failure; it can include other property in the customer’s custody, as defined by SIPC rules. The same customer may have separate coverage at different firms.

Limitations and exclusions: SIPC does not insure against market losses or bad investment performance. It does not cover commodities or futures accounts, nor does it guarantee the value of investments, or cover property not held by a SIPC-member firm at the time of failure.

Process: When a member firm fails, SIPC works with the bankruptcy trustee to restore customer property where possible. In many cases, customer accounts are transferred to another broker-dealer, and cash and securities up to the limits are returned or substituted; additional recovery depends on assets recovered during liquidation.