2.8.11.1. SIPC Coverage
When a brokerage firm is a member of SIPC, it means that the firm’s customers’ assets are protected against firm bankruptcy. If the firm fails, the customers get back all securities that are registered in their name and those securities that are in the process of being registered. The firm’s customer assets are then divided among customers in proportion to the size of their remaining claims.
If these funds are not sufficient to satisfy the claims, SIPC will supplement up to $500,000 per customer, with a maximum of up to $250,000 cash.
All broker-dealers that are registered with the SEC must be SIPC members, except:
• Banks that deal exclusively in municipal securities
• Firms that deal exclusively in U.S. government securities
• Firms that deal exclusively in redeemable investment company securities
If a customer has both a cash and margin account, the accounts are combined for coverage purposes.
The following claims are excluded from coverage:
• Claims of officers or partners