SIPC insurance.
In plain English
SIPC, the Securities Investor Protection Corporation, protects customers if a member brokerage fails and cannot return their assets. It covers up to 500,000 dollars per customer, including a 250,000 dollar limit for cash, by helping recover the stocks, bonds, and cash held at the failed firm. It is the brokerage equivalent of FDIC insurance for banks, but with a crucial difference: SIPC does not cover investment losses. If your stocks fall in value, that is market risk, not something SIPC protects. It only steps in when the brokerage itself fails and assets go missing.
01Why it matters
SIPC is what stands behind your brokerage account if the firm collapses, so knowing it covers firm failure but not market losses sets the right expectation for your investments.
02The math, step by step
Your brokerage fails while holding 300,000 dollars of your stocks and 50,000 dollars in cash. SIPC helps recover those assets, up to its limits. But if the stocks had simply dropped in value, SIPC would not cover that loss.
03What this is NOT
SIPC does NOT cover investment losses. It protects your assets if the brokerage fails, not against your stocks or funds falling in value, which is normal market risk.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.