SIPC
Updated:
Brokers regulated by SIPC
TD AmeritradeRead review- No documented advantages.
FinamRead review- User-friendly platform for trading stocks and futures
- Wide range of tradable instruments
What Is SIPC?
The Securities Investor Protection Corporation (SIPC) is a federally mandated, non-profit organization created in 1970 to protect customers if a brokerage firm fails. Unlike the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits, SIPC protects assets held in brokerage accounts.
What SIPC Covers
- Customer account protection: securities and cash held at a failed brokerage are protected up to $500,000 in total, including a $250,000 limit for cash balances.
- Asset recovery: SIPC works to locate and return missing securities and funds to investors when a brokerage firm mishandles their holdings or goes bankrupt.
What SIPC Does Not Cover
SIPC does not protect against losses caused by market movements, investment fraud, or poor investment decisions. Commodities and futures contracts are excluded from coverage, high-net-worth accounts may exceed the coverage limits, and recovering assets after a brokerage failure can take time.
SIPC Compared to Other Protection Schemes
| Concept | Purpose | Coverage Limits | Applicability |
|---|---|---|---|
| SIPC | Protects against brokerage failure | Up to $500,000 for securities | Brokerage accounts |
| FDIC | Safeguards bank deposits | Up to $250,000 per account | Bank deposits |
| CIPF (Canadian Investor Protection Fund) | Protects Canadian investors | Up to CAD 1 million | Brokerage accounts in Canada |
Why It Matters When Choosing a Broker
SIPC membership is one indicator of a brokerage's regulatory standing in the United States. It does not guarantee against trading losses and is not a substitute for checking a broker's licensing, financial stability, and track record.