SIPC protection restores the cash and securities in your account if your SIPC-member brokerage firm fails and customer assets are missing. The limit is $500,000 per customer per separate capacity, including up to $250,000 in cash. SIPC does not protect you against market losses, bad investment advice, or worthless securities you were sold.
You opened your brokerage app and noticed "Member SIPC" at the bottom of the screen, or a news story about a troubled broker made you wonder what happens to your account if the firm goes under. Maybe your balance has grown past half a million dollars and you want to know whether that matters. Here is what the protection actually does.
What is SIPC?
SIPC, the Securities Investor Protection Corporation, is a nonprofit membership corporation created by Congress under the Securities Investor Protection Act. When a member brokerage firm fails, SIPC works to return customers' cash and securities that are missing from their accounts.
Membership is mostly automatic. According to SIPC's explanation of what it protects, any broker-dealer registered with the SEC is a member, with narrow exceptions such as firms whose business is conducted mainly outside the U.S. or that only sell mutual funds, variable annuities or insurance.
How much does SIPC cover?
SIPC covers up to $500,000 per customer, of which no more than $250,000 can be cash. The limit applies to what is missing from your account when the firm's liquidation begins, not to what your account was worth at its peak.
There is no citizenship requirement. SIPC says a non-U.S. citizen with an account at a member firm is treated the same as a U.S. resident.
Does SIPC cover more than $500,000 if you have several accounts?
Yes, if the accounts are held in different "separate capacities." SIPC's page on investors with multiple accounts says each separate capacity is protected up to $500,000, while accounts held in the same capacity are combined.
Examples of separate capacities listed by SIPC include:
- An individual account
- A joint account
- A traditional IRA
- A Roth IRA
- An account for a corporation
- An account for a trust created under state law
- An account held by an executor for an estate
- An account held by a guardian for a minor
Worked example
Suppose one investor has these accounts at a single member firm that fails with assets missing:
| Account | Capacity | Value | Maximum SIPC protection |
|---|---|---|---|
| Brokerage account A | Individual | $400,000 | Combined with B: $500,000 total |
| Brokerage account B | Individual | $300,000 | (combined above) |
| Joint account with spouse | Joint | $350,000 | $350,000 |
| Traditional IRA | IRA | $200,000 | $200,000 |
| Roth IRA | Roth IRA | $90,000 | $90,000 |
The two individual accounts total $700,000 but share one $500,000 limit, so $200,000 of that would fall outside SIPC protection. The joint account and the two IRAs each get their own limit. This is a simplified illustration: actual recoveries also depend on the firm's own assets and any additional insurance it carries.
What does SIPC not cover?
SIPC protects the custody of your assets, not their value. That is the single most misunderstood point about it. SIPC states plainly that it does not protect against a decline in the value of your securities, against being sold worthless securities, or against losses from a broker's bad advice or unsuitable recommendations.
SIPC also does not treat these as protected "securities":
- Commodity futures contracts, unless held in a special portfolio margining account
- Foreign exchange trades
- Unregistered investment contracts, such as limited partnership interests not registered with the SEC
- Fixed annuity contracts not registered under the Securities Act of 1933
- Crypto assets that are not registered securities, even if held at a member firm
That list matters for private investments. Most private placements are unregistered, so SIPC membership of the broker that sold them does not protect their value. Our guide to Rule 506(b) and 506(c) offerings explains how those deals are sold.
Is a money market fund covered?
Yes, as a security. SIPC says money market mutual funds are protected as securities, not as cash. That protection still only applies if shares are missing because the firm failed; it does not cover a drop in the fund's value.
How is SIPC different from FDIC insurance?
FDIC insurance protects bank deposits; SIPC protects brokerage customers' custody of cash and securities. SIPC itself stresses that its protection "is not the same" as FDIC coverage, because SIPC does not protect the value of any security.
| SIPC | FDIC | |
|---|---|---|
| Where it applies | SIPC-member brokerage firms | FDIC-insured banks |
| What it protects | Missing securities and cash held for investing | Deposits such as checking, savings and CDs at the bank |
| Market losses covered? | No | Not applicable (deposits don't fluctuate) |
| Core limit | $500,000 per capacity, $250,000 cash | Set separately by the FDIC per depositor, per bank, per ownership category |
Many brokerages "sweep" uninvested cash into partner banks, which can move that money under FDIC rules instead of SIPC. Check your account agreement to see where your cash actually sits.
How do you check whether your broker is a SIPC member?
Look for the firm in SIPC's member database on sipc.org, and confirm the firm's registration and history on FINRA BrokerCheck. Be careful with lookalike names: fraudsters sometimes borrow the name of a real firm. Our guide on how to spot investment fraud covers the common impersonation tricks.
Remember that a SIPC logo on an unregistered "investment platform" means nothing if the entity holding your money is not itself a member broker-dealer.
Frequently asked questions
Does SIPC cover losses if the stock market crashes?
No. SIPC does not protect against declines in the value of your investments for any reason. It only restores missing cash and securities when a member brokerage firm fails.
Are IRAs protected by SIPC?
Yes, if they are held at a SIPC-member broker. SIPC treats a traditional IRA and a Roth IRA as separate capacities, each protected up to $500,000 including $250,000 in cash.
Do I need to file a claim to get SIPC protection?
When a member firm is placed in a SIPC liquidation, customers are generally notified and asked to file claims with the trustee. In many cases, accounts are transferred to another brokerage firm.
Does SIPC cover private placements?
Generally not for their value. SIPC does not protect unregistered investment contracts such as limited partnership interests, and it never protects against an investment losing value.
Related: What is liquidity risk? · How to spot investment fraud · How to choose a financial advisor