What is SIPC?

Vern Sumnicht CEO \ CIO |

People may ask, “if I should take my savings out of the bank, where can I put my savings that is safe.” Banks offer FDIC insurance up $250,000. However, what most people don’t realize is that brokerage firms offer Securities Investor Protection Corporation (SIPC) up to $500,000 on securities and $250,000 on cash, plus additional insurance.

What is SIPC?

The Securities Investor Protection Corporation (SIPC) is a nonprofit organization that protects stocks, bonds, and other securities in case a brokerage firm goes bankrupt, and assets are missing.

The SIPC will cover up to $500,000 in securities, including a $250,000 limit for cash held in a brokerage account.

What accounts are covered?

All brokerage accounts securities are covered by SIPC. This includes money market funds held in a brokerage account since they are considered securities. Learn more about SIPC coverage at www.sipc.org.

Excess of SIPC

In addition to SIPC protection, many brokerage firms provides customers with additional "excess of SIPC" coverage. The excess coverage would only be used when SIPC coverage is exhausted. Like SIPC, excess protection does not cover investment losses in customer accounts due to market fluctuation.

Many firms provide total aggregate excess of SIPC coverage. There is a per customer limit of $1.9 million on coverage of cash awaiting investment. This is the maximum excess of SIPC protection currently available in the brokerage industry.

The next question might be, “what securities could I own that are safe?” A couple of ideas that might be helpful include Fidelity® Treasury Money Market Fund or SPDR Bloomberg 1-3 Month T-Bill ETF (BIL).