SIPC protection.

In plain English

The Securities Investor Protection Corporation steps in when a member broker-dealer collapses and customer property is missing, working to return securities and cash held in the account. Coverage has a dollar cap per customer with a lower sublimit for cash, and the current figures come from SIPC rather than from any fixed constant. In most failures, accounts are simply transferred whole to another brokerage and no cap ever comes into play. Membership is required for brokerages registered with the SEC, and the fund is financed by assessments on members. Some assets, including commodity futures in a futures account and most currency positions, fall outside what it covers.

01Why it matters

It answers a specific question, what happens to your holdings if the brokerage itself fails, and knowing the answer keeps that worry separate from the ordinary risk of your investments losing value.

02The math, step by step

Say an account holds $180,000 of stock and $40,000 of cash when the brokerage fails and records show $30,000 of securities missing. The recovery process aims to make the account whole in securities and cash, and only balances above the applicable caps would be at risk.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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