Questions About SIPC
Is SIPC a regulator?
No. SIPC is not a self-regulatory organization and it has no regulatory authority. Therefore, SIPC cannot investigate investor complaints or take action against solvent, operating brokerage firms.
Is SIPC a U.S. Government Agency?
No. SIPC is not an agency or establishment of the United States Government. SIPC is a non-profit membership corporation created under the Securities Investor Protection Act.
Questions About Brokerage Firms
I am a customer of a non-U.S. (foreign) brokerage firm that is not a SIPC member, but that has a relationship with a U.S. brokerage firm that is a member of SIPC. Am I eligible for SIPC protection?
SIPC protection is available only with respect to cash and securities credited to a customer account at a SIPC-member brokerage firm in liquidation or in a direct payment procedure under the Securities Investor Protection Act (SIPA). If a foreign brokerage firm has opened an account for its customers at a SIPC-member firm, and if the member firm is placed in SIPA liquidation, each of the foreign firm’s customers may be eligible for SIPC protection on a pass-through basis. It is important to emphasize that SIPC protection is only available in a SIPA proceeding, and is not available in any non-SIPA bankruptcy or insolvency proceeding of a non-SIPC member firm.
I am a customer of a division of a SIPC member. Is there SIPC protection for my account?
SIPC protects customers of SIPC member broker-dealers. Determining whether your account is at the broker-dealer is a question that should be addressed your brokerage firm, FINRA, the Securities and Exchange Commission, or your state securities regulator. If your account is at the broker-dealer, you will be eligible for SIPC protection with respect to the cash and securities in that account if your brokerage firm is in liquidation or in a direct payment procedure under the Securities Investor Protection Act.
I have a problem with my brokerage firm. Should I contact SIPC?
SIPC is not a regulator. If you have a complaint about a brokerage firm or about your account that has not been resolved to your satisfaction, you should contact FINRA, the Securities and Exchange Commission, or your state securities regulator.
I have a question about my investment. Can SIPC help me?
Questions regarding individual investments are best directed to your brokerage firm, FINRA, the Securities and Exchange Commission, or your state securities regulator.
My brokerage firm has excess SIPC insurance. How does that work?
Excess SIPC insurance is insurance provided by a private insurer and not by SIPC. The insurance is intended to protect brokerage customers against the risk that customers will not recover all of their cash and securities in the proceeding under the Securities Investor Protection Act (SIPA). Under many of these policies, customer eligibility for recovery is not determined until after the SIPA liquidation of the customer’s brokerage firm has concluded and the amount of the customer’s recovery in that proceeding has been established.
You should contact your brokerage firm if you have questions regarding excess SIPC insurance. SIPC has no authority, involvement, or expertise regarding such insurance.
My firm was a SIPC member, but isn’t anymore. Am I still protected by SIPC?
SIPC protection applies to a former SIPC member only up to 180 days after the brokerage firm ceases to be a SIPC member. If you have questions about when your broker-dealer ceased to be a SIPC member, contact us.
Questions About Customer Protection
What recovery is a brokerage customer entitled to in the event that the customer’s brokerage firm is placed in liquidation under the Securities Investor Protection Act, and how is the amount of that recovery calculated?
In the liquidation of a SIPC-member brokerage firm under the Securities Investor Protection Act , a customer has a claim against the brokerage firm in the amount of the customer’s “net equity.” A customer’s “net equity” is the value of cash and securities owed by the brokerage firm to the customer, minus the amount of any indebtedness that the customer owes to the brokerage firm. Net equity is measured on the “filing date” – usually the date SIPC files an application in court to have the brokerage firm placed in liquidation.
Cash and securities held by the broker-dealer for customers comprise a fund of “customer property” which is shared pro rata by customers based on each customer’s “net equity.” For example, if the fund of customer property consists of 90% of what should have been held by the brokerage firm for customers, then all customers receive 90% of their “net equity” claims from this fund.
In many liquidations, the fund of customer property is not sufficient to satisfy fully every customer’s “net equity” claim. In that case, SIPC advances its funds – up to $500,000 per customer (but not more than $250,000 for cash claims) – to make up any shortfall.
I have a securities account. Isn’t everything in my securities account protected by SIPC?
Not necessarily. In general, SIPC protection is determined on an asset-by-asset basis and extends only to: (1) cash in a customer’s account that is on deposit for the purchase of securities; and (2) “securities,” as defined under the Securities Investor Protection Act. SIPC protection also is available with respect to certain futures contracts, and options on such contracts, where those instruments are held in a portfolio margining account carried by a SIPC-member brokerage firm as a securities account pursuant to a portfolio margining program approved by the Securities and Exchange Commission.
Are commodity futures contracts protected by SIPC?
Commodity futures contracts are protected by SIPC only if held in a portfolio margining account that is carried as a securities account pursuant to a portfolio margining program approved by the Securities and Exchange Commission. Commodity futures contracts held in an ordinary futures account are not protected by SIPC.
Are gold and/or silver coins protected by SIPC?
No. Gold and silver coins do not qualify as a “securities” under the Securities Investor Protection Act and therefore are not eligible for SIPC protection.
Are money market mutual funds protected by SIPC? Are they subject to the $250,000 cash limit?
Money market mutual fund shares held in a customer’s account at a brokerage firm qualify as “securities” under the Securities Investor Protection Act (SIPA) and therefore are subject to the $500,000 limit of protection, not the $250,000 limit applicable to cash. It is important to remember that, although many investors treat money market funds like cash, they are securities and, as such, may lose value. In a liquidation proceeding under SIPA, subject to the limits of SIPC protection, SIPC will return money market fund shares to a customer, but will not protect the customer against any decline in the value of those shares.
Are Municipal Bonds protected by SIPC?
Yes. Municipal bonds qualify as “securities” under the Securities Investor Protection Act and therefore are eligible for SIPC protection.
Are Real Estate Investment Trusts (REITs) protected by SIPC?
Only investment instruments that qualify as “securities” under the Securities Investor Protection Act (SIPA) are eligible for SIPC protection. REITs are “investment contracts” and therefore must be registered with the Securities and Exchange Commission (SEC) under the Securities Act of 1933 in order to be “securities” under SIPA. SIPC protection is available with respect to REITs that are so registered, but not with respect to those that are not.
Are Treasury Bills protected by SIPC?
Yes. Treasury bills qualify as a “securities” under the Securities Investor Protection Act and therefore are eligible for SIPC protection.
Are annuities protected by SIPC?
SIPC protection is not available with respect to fixed annuities and is limited with respect to claims for variable annuity contracts. SIPC does not protect against the risk of default by the issuer of a variable annuity contract (usually an insurance company) and does not protect the value of the annuity contract. SIPC protection also does not extend to claims based upon variable annuity contracts that are not registered with the Securities and Exchange Commission under the Securities Act of 1933. Finally, SIPC protection is unavailable where, as in most cases, the variable annuity contract in question is held in custody by the contract owner, and not by the brokerage firm for the customer.
Does SIPC protect my interest in my employer’s pension fund?
If your employer’s pension fund is held in a customer brokerage account at a SIPC- member brokerage firm, then cash and securities in the pension fund account may be eligible for protection by SIPC. That protection is limited to the amounts available with respect to a single account, however; i.e., an overall limit of $500,000, of which no more than $250,000 may be for cash. SIPC protection is not available separately for the individual beneficiaries of the pension fund.
What about my 401(k) account?
Similar to a pension fund account, if your employer’s 401(k) plan assets are held in a customer brokerage account at a SIPC- member brokerage firm, then cash and securities in that account may be eligible for protection by SIPC. Protection is limited to the amounts available with respect to a single account, however; i.e., an overall limit of $500,000, of which no more than $250,000 may be for cash. SIPC protection is not available separately for the individual participants in the 401(k) plan.
Is a Certificate of Deposit (CD) treated like cash?
CDs qualify as "securities" under the Securities Investor Protection Act, are eligible for SIPC protection as such, and therefore are subject to the $500,000 protection limit applicable to securities, not the $250,000 limit applicable to cash. As with all securities, however, SIPC does not protect against the risk that CDs will decline in value. Further, SIPC only protects CDs held in a customer brokerage account at a SIPC-member brokerage firm, and does not protect customers against the loss of CDs held by a non-member entity – such as a bank - even if that entity is affiliated with a SIPC member.
Does SIPC protect foreign currency in my brokerage account?
Whether foreign currency held in a customer account at a SIPC-member brokerage firm is eligible for SIPC protection depends on the account-holder’s intent concerning that currency. If the foreign currency is held in the account as an investment, then SIPC protection is not available with respect to that currency because foreign currency does not qualify as a “security” under the Securities Investor Protection Act (SIPA). If, however, the purpose of the foreign currency is to pay for investments that qualify as “securities” under SIPA, then the currency is viewed as “cash” and the customer is protected against its loss up to $250,000. The liquidation trustee will evaluate account-holder intent with respect to foreign currency based upon all of the facts and circ*mstances, including the pattern of activity, if any, in the account containing that currency.
Questions about account eligibility for SIPC protection
Are commodity futures accounts protected by SIPC?
No. SIPC protection is available only with respect to cash and securities held in a customer securities accounts at a SIPC-member brokerage firm, and is not available with respect to any assets held in futures accounts.
How are margin accounts protected?
Under the Securities Investor Protection Act, what is owed to a customer is based on the customer’s “net equity.” “Net equity” generally is the cash and securities owed to the customer by the brokerage firm minus any indebtedness owed by the customer to the brokerage firm. For purposes of computing a customer’s “net equity,” cash and securities that are collateral for a margin balance in a customer’s account are amounts owed to the customer by the brokerage firm. To arrive at the customer’s “net equity,” however, the amount of the margin balance in the account – which represents a customer debt to the brokerage firm - is subtracted from the total cash and securities owed to the customer by the firm.
If I have a margin account, what can I do to get my securities back?
A customer who has a margin balance in an account must pay the margin balance before any cash or securities otherwise owed to the customer can be returned. Any such payment must be approved by the trustee for the liquidation of the brokerage firm and must be made within the time period specified by the trustee.
I have two accounts – a margin account and a non-margin (cash) account. Is each account protected separately?
No. Margin and cash accounts in the name of the same customer that are held in the same capacity will be combined for purposes of SIPC protection. For information regarding the circ*mstances under which accounts are held by a customer in different capacities, and therefore are separately eligible for SIPC protection, see Investors with Multiple Accounts.
I am the trustee for two separate trust accounts. Is each account protected up to $500,000 by SIPC?
If each of the accounts is a "qualifying trust account," within the meaning of SIPC Rule 104(a), and if neither account was established primarily to obtain or increase SIPC protection, then each account will be deemed to be the account of a separate customer and, as such, will be eligible for separate protection by SIPC. A “qualifying trust account” is a valid and subsisting trust created by a written instrument. For more information see Investors with Multiple Accounts.
I have a joint account with one other person. Are we each protected up to $500,000 by SIPC?
No. For purposes of SIPC protection, a joint account is treated as a single customer irrespective of the number of co-owners. For more information, see Investors with Multiple Accounts and SIPC Rule 105.
I have two joint accounts - one with a spouse/significant other and one with my adult child. Is each account separately protected?
Yes. Joint accounts with different co-owners are eligible for separate protection from SIPC. For more information, see Investors with Multiple Accounts and SIPC Rule 105.
I have two joint accounts and the account owners are the same for both accounts. If I reverse the names on the accounts, will each account be protected up to the limits?
Joint accounts owned by the same persons are combined and treated as a single account for purposes of SIPC protection. Reversing the names in the account title has no effect on the amount of such protection. For more information regarding joint accounts and SIPC protection, see Investors with Multiple Accounts.
I have two individual accounts, one of which is held for the benefit of (FBO) my dependent. Does each account have separate protection?
No. Both accounts will be combined and treated as a single account for purposes of SIPC protection.
I have accounts at two different brokerage firms. Does each account have separate SIPC protection?
Yes. SIPC protection is available in the liquidation of a SIPC-member brokerage firm under the Securities Investor Protection Act (SIPA). Generally, every firm that is liquidated under SIPA is liquidated in a separate proceeding, with SIPC protection determined and available separately from every other SIPA liquidation. Accordingly, where a customer has brokerage accounts at two different SIPC-member brokerage firms that are placed in separate SIPA liquidations, the customer’s eligibility for SIPC protection generally will be determined in each proceeding without regard to any such determination in the other proceeding.
I have an account with two different brokerage firms, both of which clear their transactions through the same clearing firm. Is each of my accounts eligible for separate protection?
Yes. Where a customer has multiple brokerage accounts at a clearing brokerage firm, each introduced by a different introducing brokerage firm, each of these accounts is eligible for separate protection by SIPC. For more information, see SIPC Series 200 Rules.
Questions about residency and citizenship status and SIPC protection
Are non-residents of the U.S protected by SIPC? What about non-U.S. citizens?
Non-residents and non-U.S. citizens are eligible for the same protections from SIPC as all other customers. There is no requirement that a customer reside in, or be a citizen of, the United States in order to be eligible for SIPC protection.
Is a non-U.S. corporation eligible for protection from SIPC?
Generally, a corporation organized under non-U.S. law and/or with its principal place of business outside the United States may qualify as a “customer” under the Securities Investor Protection Act and may be eligible for SIPC protection. A corporation that is a bank or securities broker-dealer acting on its own behalf, not on behalf of customers, however, is not eligible for SIPC protection.
Other questions about SIPC protection
Does SIPC protect me if my account is hacked and cash and/or securities are stolen?
SIPC’s role and responsibilities are as defined under the Securities Investor Protection Act (SIPA). Under that law, SIPC protection is available only to customers of a member broker-dealer that is in liquidation under SIPA or is the subject of a direct payment procedure. If you discover that your account has been hacked and your securities or cash have been stolen, you should contact your brokerage firm, the Securities and Exchange Commission (www.sec.gov), the Financial Industry Regulatory Authority (www.finra.org), your state securities regulator, or other appropriate law enforcement authorities. Whether you would be protected if your account was hacked would depend upon the circ*mstances under which your account was gained access to, and other factors being present that justify the liquidation of the brokerage firm.
I believe my securities are "customer name securities." Does SIPC protection apply?
Under the Securities Investor Protection Act (SIPA), "customer name securities" generally are securities that are registered in the name of a customer or that were in the process of being registered when the customer’s brokerage firm failed and was placed in liquidation under SIPA. Where such securities are held by the brokerage firm, they are returned outright to the customer in whose name they are registered so long as the customer files a claim for them. If the securities are unavailable, SIPC protection may be available with respect to a claim based on those securities.
Who is ineligible for SIPC Protection?
Most customers with cash and securities missing from customer accounts are eligible for SIPC protection. SIPC's funds may not be used to pay the claim of any customer of a brokerage firm in liquidation under the Securities Investor Protection Act if that customer is:
- A general partner, officer, or director of the firm.
- The beneficial owner of five percent or more of any class of equity security of the firm (other than certain nonconvertible preferred stocks).
- A limited partner with a participation of five percent or more in the net assets or net profits of the firm.
- Someone with the power to exercise a controlling influence over the management or policies of the firm.
- A broker or dealer or bank acting for itself rather than for its customers.
While these customers are not eligible for SIPC protection, they may share in the distribution of “customer property” from the firm, as previously described.
Do I have to sign up for SIPC protection?
No. SIPC protection is set by federal law – the Securities Investor Protection Act (SIPA) – and thus available to every customer with cash and/or securities held in a brokerage account at a SIPC-member brokerage firm placed in liquidation under SIPA.
Can I purchase additional SIPC protection?
No. SIPC protection is provided through the Securities Investor Protection Act and cannot be purchased privately by individual investors.
Questions About Liquidations
What is a liquidation?
A liquidation under the Securities Investor Protection Act is similar to a liquidation under Chapter 7 of the United States Bankruptcy Code, with the application of certain additional rules designed to provide special relief to claimants who qualify as “customers” of the liquidating firm.
When does SIPC start a liquidation?
When SIPC is notified that a SIPC-member brokerage firm is in or is approaching financial difficulty, and SIPC determines that (1) the firm has customers eligible for protection by SIPC; and (2) the brokerage firm is insolvent; is unable to meet its obligations to customers; or, suffers from certain financial conditions. If SIPC makes this determination, SIPC files an application in the appropriate federal court seeking entry of an order placing the brokerage firm in question in liquidation under SIPA. If the court grants this application, the liquidation of the firm begins.
How soon will I receive the return of my property?
Shortly after the commencement of a liquidation proceeding, a SIPA trustee may transfer customer accounts to another solvent brokerage firm in what is called a “bulk transfer.” The bulk transfer can occur without the consent or participation of any customer, and may result in customers getting access to their property in a few days or weeks.
Even if a bulk transfer occurs, you should file a claim with the trustee in order to fully protect your interests in your property. And, if no bulk transfer is possible, or if your account is not part of a bulk transfer that occurs, you must file a claim with the trustee in order to receive your property. See below for details about the resolution of customer claims, and how long it may take.
How do I file a claim in a liquidation for the return of cash and securities in my brokerage account?
When the liquidation of a brokerage firm under the Securities Investor Protection Act (SIPA) begins, the court appoints a trustee for the liquidation. With court permission, the trustee mails a notice of the commencement of the liquidation proceeding and a claim form to each customer who had an account with the brokerage within the previous 12 months. A website also may be available for the electronic filing of claims. If you did not receive a claim form in the mail, you can obtain a copy on SIPC’s website, www.sipc.org, or request a claim form by contacting the trustee in the case or by contacting SIPC by email (asksipc@sipc.org) or by phone (202-371-8300).
The bankruptcy court presiding over the liquidation will establish a deadline for the filing of customer claims. This deadline is usually 60 days after the date the notice of the proceeding is published, but could be as little as 30 days after the publication date. The deadline appears in the published notice and a copy of the notice that is mailed to customers. The six-month deadline for all claims is set out in the Securities Investor Protection Act (SIPA). SIPA makes SIPC protection unavailable for any claim that is received more than six months after the publication date. Except for some very narrow exceptions, there are no grounds for time extensions beyond the six month deadline.
How are customer claims in a liquidation resolved? How long does it take?
Once a customer claim is filed, the trustee will research and analyze the claim and then mail to the claimant a written determination either allowing or disallowing the claim. If the claim is allowed, the trustee will satisfy the claim through the distribution to the claimant of “customer property” or advances from SIPC, or some combination of the two.
How quickly claims are satisfied depends on the complexity of the liquidation and thecondition of the failed brokerage firm’s records. Delays of several months can arise when the firms’ records are not accurate or incomplete. It also is not uncommon for delays to take place when the brokerage firm or its principals were involved in misconduct. When the records of the brokerage firm are accurate, and no misconduct occurred, deliveries of some securities and cash to customers may begin shortly after the Trustee receives completed claim forms from customers. Generally, in these cases, customers may receive at least some of their property one to three months after filing a completed claim form.
If a customer claim is denied by the trustee, the claimant will be able to seek bankruptcy review of the trustee’s determination.
For more information, see the following brochure: Liquidations-Web.pdf
Questions About Direct Payment Procedures
What is a direct payment procedure?
In certain instances, when a small brokerage firm fails, SIPC may conduct an out-of-court claims process which is referred to as a “direct payment procedure.” In a direct payment procedure, customers submit claims to SIPC. If valid, the claims are satisfied exclusively through advances by SIPC.
Will SIPC protection be different in a direct payment procedure?
No. Customers in a direct payment procedure are eligible for SIPC protection up the same limits applicable in a liquidation under the Securities Investor Protection Act; i.e., a maximum of $500,000, of which no more than $250,000 may be based on a claim for cash.
