This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
SIPC — the Securities Investor Protection Corporation — is the government-mandated insurance program that protects your brokerage account if your broker fails. Understanding exactly what SIPC covers, what it does not, and how it works is essential before you deposit money with any broker. SIPC protects your securities and cash up to $500,000 per account if your broker goes bankrupt or misappropriates assets. It does not protect against investment losses.
What SIPC Covers
SIPC protects customers of a failed brokerage firm. If your broker becomes insolvent or misappropriates customer assets, SIPC steps in to return your securities and, within limits, your cash. The standard coverage limits are:
- Securities: Up to $500,000 per account (including a $250,000 limit for cash)
- Cash: Up to $250,000 of the total $500,000 limit
SIPC coverage applies per account type, not per broker. If you hold a standard individual brokerage account and an IRA at the same broker, each account is separately protected up to the $500,000 limit. Similarly, joint accounts have separate coverage from individual accounts.
The types of securities SIPC covers include stocks, bonds, ETFs, mutual funds, Treasury securities, certificates of deposit, and money market mutual funds held at a broker.
What SIPC Does NOT Cover
SIPC is not equivalent to FDIC insurance for banks, and the differences are important:
- Market losses. If your investments decline in value, SIPC does not cover the loss. SIPC is broker-insolvency insurance, not investment-loss insurance.
- Crypto assets. Cryptocurrencies held at a broker are not SIPC-protected, even if held in the same account as stocks. Crypto is not classified as a security for SIPC purposes.
- Commodities futures and forex. Accounts holding futures contracts or foreign exchange positions are not covered by SIPC. These products fall under different regulatory frameworks.
- Annuities and insurance products. Fixed and variable annuities, even if purchased through a broker, are not SIPC-protected.
- Bad investment advice. If your broker recommended an investment that lost value, SIPC does not reimburse you. SIPC only addresses broker insolvency and asset misappropriation.
- Investments in unregistered securities. SIPC covers securities registered under US securities laws. Unregistered or fraudulent investments may not qualify.
The SIPC Claims Process
If your broker fails, here is what actually happens:
SIPC files an application in federal court to initiate a protective proceeding for the broker's customers. This begins the formal process.
A trustee is appointed — typically an attorney or accountant experienced in securities liquidations — to oversee the return of customer assets.
The trustee identifies customer assets. Customer securities that are held in segregated accounts are identified and returned to customers directly. This process depends on the quality of the broker's records.
If customer assets are missing, SIPC advances funds — up to the $500,000 limit — to cover the shortfall. The advance is made from SIPC's fund, not from the failed broker's assets.
The trustee distributes assets and SIPC advances to customers. The timeline varies but typically takes weeks to months for most claims.
Customers with claims above the SIPC limit become general creditors of the broker's estate for the amount above $500,000. Recovery in this category is less certain and depends on the broker's remaining assets.
Historical SIPC Cases
SIPC has handled over 330 broker liquidations since its creation in 1970. Here are the most instructive cases:
Lehman Brothers (2008): When Lehman failed during the financial crisis, SIPC oversaw the return of over $110 billion in customer assets. The process was complex because Lehman's records were not immediately clear, but the vast majority of customers received their assets back. Cash above the $250,000 SIPC limit was partially recovered through the bankruptcy process.
Bernie Madoff (2008): Madoff's Ponzi scheme was not a typical broker failure — it was fraud. SIPC advanced funds to eligible customers based on their net investment (money deposited minus money withdrawn), not the fictitious account values shown on statements. This case illustrates that SIPC works differently when the broker's books are fabricated.
MF Global (2011): MF Global used customer funds to cover its own trading losses. SIPC oversaw the process, and while some customers waited over a year, virtually all domestic customers received 100% of their assets back. The case demonstrated that even when a broker misuses customer funds, the combination of SIPC and the legal process can result in full recovery.
Excess SIPC Insurance
Some brokers purchase additional insurance beyond SIPC limits through private insurers like Lloyd's of London. This is a voluntary election by the broker, not a regulatory requirement. Excess SIPC insurance matters most for accounts that exceed the $500,000 SIPC limit.
| Broker | SIPC | Excess SIPC | Type |
|---|---|---|---|
| Fidelity | $500K | $1 billion+ aggregate | Aggregate pool |
| Charles Schwab | $500K | $600 million aggregate | Aggregate pool |
| Interactive Brokers | $500K | $30 million per customer | Per-customer (Lloyd's) |
| E*TRADE | $500K | $600 million aggregate (via Morgan Stanley) | Aggregate pool |
| Vanguard | $500K | $250 million aggregate | Aggregate pool |
| Robinhood | $500K | None | — |
| Webull | $500K | None | — |
The distinction between "per customer" and "aggregate" coverage matters. Per-customer coverage applies to each individual account, regardless of how many other customers also have claims. Aggregate coverage is a total pool shared across all customers. In a very large broker failure, an aggregate pool could be exhausted before all excess-SIPC claims are fully covered.
SIPC vs FDIC
| Feature | SIPC | FDIC |
|---|---|---|
| What it covers | Securities and cash at brokers | Deposits at banks |
| Coverage limit | $500K ($250K cash) | $250K per account type |
| Protects against | Broker insolvency | Bank failure |
| Protects against market losses? | No | N/A (deposits don't fluctuate) |
| Created by | Securities Investor Protection Act of 1970 | Banking Act of 1933 |
| Funded by | Member broker assessments | Bank insurance premiums |
If your broker offers a cash sweep program into FDIC-insured banks, your cash is protected by FDIC up to $250,000 per bank. Your securities remain under SIPC. The two systems work together: FDIC for cash in banks, SIPC for securities in brokerage accounts.
SIPC Coverage by Account Type
| Account Type | SIPC Limit | Notes |
|---|---|---|
| Individual taxable | $500K | Standard coverage |
| Joint account | $500K | Separate from individual account |
| Traditional IRA | $500K | Separate from taxable accounts |
| Roth IRA | $500K | Separate from Traditional IRA |
| Custodial (UTMA/UGMA) | $500K | Separate coverage |
| Trust account | $500K | Separate coverage |
| Corporate account | $500K | Separate coverage |
The key principle: each distinct account type at the same broker receives its own $500,000 SIPC protection limit.
International Equivalents
If you invest through a non-US broker, SIPC does not apply. Other countries have their own investor protection schemes:
| Country | Scheme | Coverage Limit |
|---|---|---|
| United Kingdom | FSCS (Financial Services Compensation Scheme) | £85,000 per person |
| Canada | CIPF (Canadian Investor Protection Fund) | C$1 million per account |
| European Union | Varies by country; minimum €20,000 under EU directive | Varies |
| Australia | National Guarantee Fund (NGF) | Varies by claim type |
| Singapore | FSC (Fidelity Fund) | S$75,000 |
Frequently Asked Questions
How do I check if my broker is SIPC-insured? Visit sipc.org and use the member directory search. Enter the broker's name as it appears on your account statement. Every US-registered broker should appear in this database. If a broker is not listed, it is not SIPC-insured and is not legally operating in the United States.
Does SIPC cover accounts at non-US brokers? No. SIPC is a US program. Non-US brokers may participate in their own country's compensation scheme. Check with the broker's local regulator.
What if my account exceeds SIPC limits? For amounts above $500,000, consider a broker that carries excess SIPC insurance: Fidelity ($1B+ aggregate), Schwab ($600M aggregate), or Interactive Brokers ($30M per customer). You can also spread assets across multiple account types or multiple brokers to stay under the limit per account.
Can I have SIPC coverage at multiple brokers? Yes. SIPC coverage applies per broker. If you have $500,000 at Broker A and $500,000 at Broker B, both accounts are separately protected. This is one reason some investors with substantial assets use multiple brokers.
Does SIPC cover my cryptocurrency? No. Cryptocurrency is not classified as a security for SIPC purposes. If you hold crypto at a broker that offers crypto trading, those assets are not SIPC-protected. Consider a dedicated crypto wallet for crypto holdings.
How fast does SIPC pay claims? The timeline varies. For straightforward cases with good brokerage records, customers may receive their assets within weeks. Complex cases — particularly those involving fraud or poor record-keeping — can take months or years. SIPC does not guarantee a specific timeline.
Is SIPC funded by the government? No. SIPC is funded by assessments on its member broker-dealers. It is not a government agency, though it was created by federal statute and operates under SEC oversight.
What documents do I need for an SIPC claim? SIPC will request your account statements, trade confirmations, and identity documents. Keeping your own records — particularly the most recent statement before a broker failure — simplifies the claims process. A practical measure is to download and save your most recent monthly statement.
Where to Start
Check whether your broker is SIPC-insured at sipc.org. If your account approaches or exceeds $500,000, consider a broker with excess SIPC coverage. Read the broker safety hub for the complete protection framework. If you are considering a specific broker, check its dedicated safety page for the broker's specific SIPC and excess coverage details.
Investing involves risk. The value of investments can go up as well as down and you may receive back less than your original investment. This review contains affiliate links. If you open an account through our link, we may receive a commission at no additional cost to you. Our reviews are independent and based on factual data.