Updated: Mar 14, 2024

SIPC Insurance: What Assets are Protected?

Learn what investment assets are protected by SIPC insurance, including the process to file a claim. Compare it to FDIC insurance for bank deposits.
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You may or may not be aware of SIPC, even if you are an investor.

But if you’re like most investors, and you assume there must be some sort of FDIC equivalent for investment brokerage accounts, you’ll be partially correct.

The Securities Investor Protection Corporation (SIPC) is an insurance fund set up by the federal government to provide limited protection to people who have their money held with investment brokers and other non-bank financial institutions.

But beyond knowing that the SIPC exists, and having a loose concept of what it does, there are a lot of details that are less well understood.

Those details naturally lead to some confusion about exactly what the coverage is and what it does.

What is the SIPC?

The SIPC was created in 1970 when Congress passed the Securities Investor Protection Act, with the purpose of protecting investors against certain types of loss that are the result of broker-dealer failure.

Though it’s technically not considered to be a government agency, it was nonetheless created by federal law and is overseen by the Securities and Exchange Commission (SEC).


The SIPC functions as a non-profit insurance agency for the brokerage industry.

How much does the SIPC insurance cover?

Investors are protected for up to $500,000 in securities and cash, including up to $250,000 in cash.

SIPC works to intervene when investors are at risk of losing money as a result of a failure by an investment broker.

They don’t work to bail out troubled or insolvent firms, but rather get involved early in the process to limit the damage.

Claims will be paid out only when the liquidation of a firm leaves investors with losses resulting from liquidation.

Handling failing firms

And like the FDIC, they often act first to merge a failing investment firm with a healthy one.

Some of the major SIPC interventions in recent years have included the failures of Lehman Brothers, MF Global, and Bernard L. Madoff Investment Securities.

They are also involved in cases of major investment fraud.

No cost to the investor

One of the big advantages with SIPC coverage is that, just like FDIC insurance, it comes at no cost to you as the investor.

The cost of the program is paid by participating members.

But naturally, the cost of that participation is passed on to investors/customers in the form of investment fees and other charges by the investment brokers.

What is Protected by SIPC – and What Isn’t?

As noted above, the purpose of the SIPC is to protect investors from the failure of securities brokers and dealers.

Should a firm become insolvent, or appear to be heading in that direction, the SIPC will intervene and work to provide orderly distribution of investor assets based on whatever is available at that firm.

The same will be true in the case of broker-dealer instances of fraudulent activity in managing investors’ accounts.

Specific investments covered include stocks, bonds, mutual funds, exchange-traded funds, certificates of deposit, and money market mutual funds. SIPC coverage will also extend to employer pension funds held in a brokerage account.

Losses which will not be covered by SIPC include:

  • Losses exceeding $500,000.
  • Cash losses exceeding $250,000.
  • Losses due to declines in the market value of securities.
  • Investment losses sustained through a broker/dealer that is not an SIPC participant (though the vast majority are).
  • Assets not defined as securities by the Securities Act of 1933. These include gold and silver coins, foreign currencies, fixed annuities, and commodity futures contracts held in ordinary futures accounts.

Another important factor in recovery is that while SIPC will work to recover the shares of an investment you own, it will be at the then-prevailing market value.

You won’t be entitled to recovery based on the original purchase value of those securities, or even their value at the time of broker failure.

Why SIPC Insurance Matters


As an investor, you’re already taking on a significant amount of risk by investing your money in non-bank investments, or securities not guaranteed by the US government.

That includes stocks, mutual funds, exchange-traded funds, options, and virtually any other type of asset that has the potential to fluctuate in value.

This is what’s referred to as market risk, and it’s inherent in the investing process.

So (quite obviously):

SIPC won’t protect you from losses due to market fluctuations in the value of your securities.

But it will provide a measure of protection against the bigger picture risk of fraud or failure by the investment broker holding your investments.

When the SIPC steps in

Should either fraud or financial failure take place with your investment broker, the resolution of that problem will be completely beyond your control.

If the broker is a member of SIPC, you’ll at least be protected up to the coverage limits the agency provides.

You’ll be well-advised not to participate in a broker or investment situation that will not be covered by SIPC.

Even if you are not an investor, SIPC performs an important function in your life.

Since it helps to stabilize investment broker/dealers and instill confidence in investors, it helps to maintain a well-functioning financial system. That benefits investors and non-investors alike.

How to File a Claim

If a bank fails, the FDIC will step in and insure your accounts immediately.

Generally, no further action is required on your part.

In most cases, banking operations will continue as normal, despite the insolvency of the institution.


The SIPC claim process is more complicated.

You generally need to file a claim within 60 days of being notified by the SIPC of an issue with your broker.

You’ll need to file a claim even if your account has been transferred to another brokerage firm. That will protect you in the event losses were sustained prior to the transfer, or even as a result of it.

You’ll need to file a Customer Claim Form with the trustee appointed to oversee the liquidation or reorganization of your original broker.

Be aware that the form is unique to each institutional intervention by SIPC, and will generally be provided by the trustee (see an example of the claim form).

If it isn’t provided to you, you can obtain the specific claim form in one of three ways:

  1. Visit the SIPC.org website.
  2. By email, at asksipc@sipc.org.
  3. By phone, at (202)371-8300.

Filing the customer claim form

When you submit your claim form, include any other relevant documentation.

These will include:

  • brokerage account records
  • monthly or quarterly statements
  • trade confirmation slips of both purchases and sales
  • any correspondence you had with the broker regarding any discrepancies

Be sure to make copies of any supporting documentation to submit with your claim form – never send originals.

The claim form and supporting documentation should be sent by certified mail, return receipt requested.

In each case, the bankruptcy court will establish a deadline for filing investor claims.

Again, this is usually 60 days after the date of notice of the proceeding is published, with a copy sent to each potential claimant.

You’re eligible to file a claim if you have had any dealings with the investment broker in question within the past 12 months.

WARNING: Be aware that any claims received six months or more after the deadline will not be eligible for protection.

How long does it take to settle a claim?

This is another area where there is a significant departure between SIPC and FDIC.

While FDIC claims are handled seamlessly and immediately, SIPC claims will depend on the complications involved in the liquidation process.

In a relatively clean situation, your covered assets will be at least partially returned within one to three months after filing your claim form.

But it can take many months in situations where fraud is involved, or the broker failed to keep accurate records.

If the trustee is able to transfer accounts and assets to a successor organization, you may have access to your securities and funds within one to three weeks.

SIPC Insurance vs. FDIC Insurance

Perhaps the major difference between SIPC insurance and FDIC insurance is that FDIC coverage applies only to banks.

FDIC will step in and cover any losses sustained by depositors that are caused by mismanagement or other events that are the fault of the banking institution.

SIPC insurance applies only to brokerage firms, and only in those situations where investors take a substantial loss due to either broker failure or fraud.

The reality is:

This is a relatively rare event, and it doesn’t extend to the most typical reason why investors lose money with any investment broker, which has to do with investment market declines.

Where FDIC will cover just about any loss sustained by a depositor at a bank, SIPC coverage is much more limited in its scope.

However, be aware that FDIC insurance covers only bank-issued instruments.

If you hold investment securities through your bank, those are not covered by FDIC, but by SIPC.

The process of how each operates is also very different.

While FDIC attempts to make potential bank losses invisible to the depositor, the SIPC recovery process can be much more complicated.

The agency may need to sort out the broker’s situation before any claims will be paid. Unlike FDIC, an SIPC claim won’t be instantaneous.

That brings up another significant difference between the two. While you need to file a claim form to be eligible for benefits through SIPC, no such filing process is required with FDIC.

In the grand scheme of things, SIPC doesn’t provide the level of protection that FDIC does.

But, you’re still better off having it than not.