Securities Investor Protection Corporation (SIPC)
A federally mandated, industry-funded nonprofit that protects customers of failed US broker-dealers by recovering cash and securities up to $500,000 per account.
What is SIPC?
The Securities Investor Protection Corporation (SIPC) is a nonprofit membership corporation created by the Securities Investor Protection Act of 1970 to protect customers of failed FINRA-registered broker-dealers. If a brokerage firm fails and customer assets are missing, SIPC steps in to recover cash and securities held in customer accounts up to $500,000 per customer, including up to $250,000 in cash. SIPC protection covers stocks, bonds, and other securities held at the broker, but does not cover losses from declining market values, fraud in investment advice, or assets such as commodities and currency. SIPC is funded by member securities firms, not taxpayer money, and it is not a government agency.
Example
When MF Global collapsed in 2011, SIPC initiated a liquidation proceeding to recover customer property. SIPC protection meant that eligible US securities customers received their holdings back, though the process took years and customers with shortfalls in segregated commodity accounts faced a separate and more difficult recovery process not covered by SIPC.
Source: Securities Investor Protection Act of 1970 (15 U.S.C. §§ 78aaa–78lll)