The Securities Investor Protection Corporation, or SIPC, is a nonprofit corporation that protects investors in the event of brokerage failure.
The SIPC is a nonprofit corporation created to protect U.S. investors. The organization was created by Congress following the “Paperwork Crunch” of 1968-1970 that saw over 100 brokers face liquidation and thousands of customers suffer securities loss or theft.
Despite its origins and SEC oversight, the SIPC isn’t a U.S. government agency, and it holds no regulatory or investigative authority.
Instead, the SIPC primarily acts as insurance for broker-dealers and their respective investors. Every customer of a member SIPC brokerage receives up to $500,000 in coverage per account type. ($250,000 maximum benefit for cash holdings.)
This coverage protects investors from brokerage failure, securities theft and unauthorized trading within their accounts. When a brokerage faces financial trouble, the SIPC oversees the liquidation and works with court-appointed Trustees to return customer assets.
The SEC requires that broker-dealers, introducing firms and clearing firms that sell stocks or bonds to the investing public join the SIPC. Though some firms, like variable annuity-only brokers, aren’t required to join, they must disclose this fact to customers.
Generally, you qualify for SIPC protection if:
However, SIPC insurance doesn’t cover everything, including:
The SIPC extends up to $500,000 in protection per “separate capacity” brokerage account, including up to $250,000 protection for cash. Each “separate capacity” is a different kind of investment account. Examples of separate capacities include:
In other words, if you held $500,000 each in an individual, joint, traditional IRA and Roth IRA account, you’d receive up to $2 million in protection at one brokerage. But if you held two individual accounts, you’d only receive $500,000 in protection.
Fortunately, most broker-dealers are required to be SIPC members. However, it’s still wise to check that your brokerage is a member of the SIPC before signing up. (Or that you understand the risks if they’re a specialty brokerage.)
Aside from double-checking membership status upon signup, it’s unlikely you’ll run into the SIPC much. Brokerage firm failures are relatively rare.
But if your firm does go bankrupt without transferring your account, the SIPC will notify you on how to file a claim. Additionally, if you suspect securities theft or unauthorized trading, the SIPC can help make you whole again.
If you’re worried about your SIPC status at Q.ai: don’t. Q.ai holds your accounts at Apex Clearing, an SEC-registered broker-dealer and member FINRA/SIPC. All accounts are insured up to $500,000, including a maximum of $250,000 for cash claims.
Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.