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How SIPC Protects You

Savvy Consumer: How SIPC Protects You

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How SIPC Protects You

Understanding the Securities
Investor Protection Corporation

Securities Investor Protection Corporation

The Role of SIPC
What SIPC Covers and What It Does Not
How We Help: What You Need To Know About SIPC
Seven Questions Investors Ask Most Often
Avoiding Investment Fraud
.pdf version


SIPC is your first line of defense in the event of a brokerage firm failure. No fewer than 99 percent of eligible investors get their investments back from SIPC. From its creation by Congress in 1970 through December 2000, SIPC advanced $391 million in order to make possible the recovery of $3.8 billion in assets for an estimated 443,000 investors.

When a brokerage is closed due to bankruptcy or other financial difficulties, the Securities Investor Protection Corporation steps in as quickly as possible and, within certain limits, works to return to you cash, stock and other securities you had at the firm. Without SIPC, investors at financially troubled brokerage firms might lose their securities or money forever or wait for years while their assets are tied up in court.


      and what it does not

SIPC is not the FDIC. The Securities Investor Protection Corporation does not offer to investors the same blanket protection that the Federal Deposit Insurance Corporation provides to bank depositors.

How are SIPC and the FDIC different? When a member bank fails, the FDIC insures all depositors at that institution against loss up to a certain dollar limit. The FDIC’s no-questions-asked approach makes sense because the banking world is “risk averse.” Most savers put their money in FDIC-insured bank accounts because they can’t afford to lose their money.

That is precisely the opposite of how investors behave in the stock market, in which rewards are only possible with risk. Most market losses are a normal part of the ups and downs of the risk-oriented world of investing. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investments falls for any reason. Instead, SIPC replaces missing stocks and other securities where it is possible to do so ... even when the investments have increased in value.

SIPC does not cover individuals who are sold worthless stocks and other securities. SIPC helps individuals whose money, stocks and other securities are stolen by a broker or put at risk when a brokerage fails for other reasons.


     What you need to know about SIPC

Understanding the rules is the key to protecting yourself and your money.


     Investors ask most often

1.  How can I be sure I am dealing with a SIPC member? Why is that important?

2.  What should I be vigilant about before a problem strikes?

3.  How quickly will I get my investments back?

4.  Who is not eligible for SIPC protections?

5.  Where do I submit my claim forms?

6.  Is there a time limit for filing claims?

7.  Do I have to prove what the broker owes me? How does that work?



Learn about investment fraud … and where to turn for help.

SIPC urges all investors to understand the dangers of investment fraud and where to turn for help if swindled. That is why SIPC works with regulatory and self-regulatory agencies, consumer groups, and other concerned parties to increase investor awareness about scams. Check out the investment fraud warnings on the following Web sites:

U.S. Securities and Exchange Commission

NASD Regulation, Inc.

National Fraud Information Center

Investor Protection Trust

Alliance for Investor Education

Your state securities agency
See the “Find a Regulator” page at

Canadian Investor Protection Fund

Securities Industry Association

You can find a list of the best investment fraud education resources on the Web by visiting SIPC on the Web at


The Securities Investor Protection Act of 1970 (SIPA) is a complex and technical statute. This brochure provides a basic explanation of the Securities Investor Protection Corporation. However, it does not explain the SIPA statute with respect to any particular fact pattern. Answers to questions involving particular facts depend upon interpretations, administrative decisions, and court actions.


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