3.11 Customer Protection: SIPC & FDIC
Understanding the distinction between SIPC (brokerage insolvency insurance) and FDIC (bank deposit insurance) is vital for investor protection questions.
Key FINRA Exam Takeaways
- SIPC: Non-profit membership corporation protecting customers against BROKER-DEALER BANKRUPTCY, NOT market declines.
- SIPC Coverage Limits: Up to $500,000 per separate customer, including up to $250,000 for cash claims.
- Excess claims: Balances exceeding SIPC limits become general unsecured creditor claims.
- FDIC: Federal agency insuring bank deposit accounts (checking, savings, CDs) up to $250,000 per depositor per bank.
| Feature | SIPC | FDIC |
|---|---|---|
| Insured Event | Broker-Dealer bankruptcy liquidation | Commercial bank failure / insolvency |
| Coverage Limits | Up to $500,000 total (max $250k cash) | Up to $250,000 per depositor per bank |
| Protected Assets | Securities and cash held at brokerage | Bank deposits (checking, savings, CDs) |
| What is NOT Covered? | Market loss; commodities; futures | Stocks, bonds, mutual funds, annuities |
Knowledge Checkpoint • Section 3.11
A customer maintains an account at a broker-dealer that enters bankruptcy liquidation. The account contains $350,000 in securities and $200,000 in cash. How much of the customer's assets are covered by SIPC?