SIPC

The Securities Investor Protection Corporation is a non-profit membership corporation created by the US Congress through the Securities Investor Protection Act of 1970. Most broker-dealers registered with the SEC must be members, and it is funded by assessments on those members. When a member firm fails, a trustee is usually appointed to liquidate it and return customers’ property, often by transferring accounts to another broker. If securities or cash are missing, SIPC advances money to restore them up to a limit per customer, with a lower sub-limit for cash.

SIPC is often described as insurance, but it is not a government agency and it does not protect against falls in the market value of investments, bad advice or unsuitable recommendations. Some assets are outside its scope, including commodity futures, foreign exchange trades, fixed annuity contracts and crypto assets that are not registered securities. It also differs from the FDIC, which protects deposits at US banks. Some brokers buy private insurance above SIPC limits, often called excess SIPC coverage, but its terms vary. Outside the US, similar roles are played by the UK’s FSCS and the investor compensation schemes of EU countries.