SIPC

The Securities Investor Protection Corporation is a non-profit corporation created by US federal law in 1970 to return customer property when a securities broker-dealer fails. Membership is compulsory for most registered broker-dealers, and understanding exactly what it does and does not cover prevents a common and expensive misreading.

What SIPC covers

Securities and cash held at a failed member firm for the purpose of buying securities, up to $500,000 per customer, of which a maximum of $250,000 may be cash. SIPC either transfers accounts to a solvent firm or, where records make that impossible, distributes customer property and makes up shortfalls from its own fund.

What it does not cover

Three exclusions matter to a trader.

First, market losses. SIPC exists for missing property, not for a position that went against you. A portfolio that fell 60% is not a SIPC claim.

Second, spot foreign exchange. Retail forex is not a security under US law, sits with the CFTC and NFA rather than the SEC, and is outside SIPC entirely. A broker holding both securities and forex registrations covers only the securities side this way, and its marketing rarely draws the line clearly.

Third, commodities and futures held outside a securities account, and most unregistered investment contracts.

Excess-of-SIPC insurance

Several large brokers buy private insurance extending cover above the SIPC ceilings, sometimes to very large per-account figures. It is a commercial policy with its own terms, aggregate limits across all clients and its own exclusions — read the terms rather than the headline number, and note that it inherits SIPC's exclusions, including the forex one.

Verifying membership

SIPC publishes a member list. A firm advertising SIPC membership for a forex account is misdescribing the cover, and ProForexBrokers.com treats that as a disclosure problem rather than a marketing flourish — it is exactly the kind of claim a client relies on at the worst possible moment.