This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 24, Series 26, Series 62, Series 82, and Series 99. –ANSWER POSTED– Continue reading
This week’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 7, Series 24, Series 26, Series 62, Series 82, and Series 99):
Jenny and Sam each have an individual account, and they have a joint account, and an UGMA account for their daughter Sarah. What is the combined maximum amount that is covered by the SIPC for the four accounts?
Answers:
A. $500,000
B. $1,000,000
C. $1,500,000
D. $2,000,000
Correct Answer: D. $2,000,000
Rationale: SIPC covers a maximum of $500,000 per “separate customer” at a broker-dealer or clearing firm including up to $250,000 in cash. Total coverage can be higher for multiple accounts if the accounts are considered to be held by separate customers. There are five categories of separate customers defined by the SIPC. These categories include 1) individual accounts, 2) joint accounts, 3) accounts held by executors, administrators, and guardians/custodians/conservators (such as UGMA accounts), 4) accounts held by corporations, partnerships, or unincorporated associations, and 5) trust accounts. Thus, two individual accounts held by two different people, one joint account, and one UGMA account would be considered four separate customers by the SIPC, and therefore subject to a maximum of $2,000,000 of coverage.
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