What Is Investor Protection?

The limits, precisely

SIPC protection is capped at $500,000 per customer, which includes a $250,000 limit for cash. Both figures are per customer at a single broker, in a single capacity — accounts held in different legal capacities, such as an individual account and a trust account, are generally treated separately.

What is inside the boundary

• Stocks, bonds, Treasury securities and certificates of deposit
• Mutual funds and money market mutual funds
• Cash held for the purpose of buying or selling securities
• Cash denominated in a currency other than the US dollar

What is outside it

• Any decline in the value of your securities
• Losses from a broker's bad investment advice or unsuitable recommendations
• Worthless stock that was sold to you
• Commodity futures contracts, with limited exceptions, and cash held in connection with commodity trades
• Foreign exchange trades
• Unregistered investment contracts and fixed annuity contracts
• Digital assets that are unregistered investment contracts, and stablecoins, currencies, commodities and futures

SIPC describes its own scope as protecting the custody function of the broker-dealer. It restores securities and cash that were in the account when a liquidation begins. That is the entirety of what it does.

SIPC and FDIC are not alternatives

FDIC insurance covers deposits at an insured bank if the bank fails. SIPC covers custody at a broker if the broker fails and assets are missing. Many brokers sweep uninvested cash into partner banks, at which point that specific cash falls under FDIC rules rather than SIPC's cash sublimit. Which programme your cash is in is a setting in your account, and it is worth knowing which one you are relying on.

Crypto is the sharpest edge

SIPC states plainly that it does not protect digital assets that are unregistered investment contracts, nor stablecoins, currencies or commodities. Several brokers in our database offer crypto alongside securities in what feels like one account. The protection does not extend uniformly across it, and the fact that both appear on the same screen does not mean both are covered.

Outside the United States

SIPC covers customers of the US broker-dealer. If your account is held by a different entity of the same brand in another jurisdiction, a different scheme applies — with a different limit, different exclusions, or, in some jurisdictions, nothing at all. The deciding document is the account agreement, which names the entity.