Securities Investor Protection Corporation (SIPC)

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Help recovering assets if your brokerage firm fails.

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If you invest through a brokerage account—including taxable investment accounts, individual retirement accounts, and many workplace retirement plans such as 401(k)s—your assets may be held by a brokerage firm that is a member of the Securities Investor Protection Corporation (SIPC).

SIPC helps customers recover securities and cash if a brokerage firm fails and customer assets are missing. SIPC is often compared to bank deposit insurance, but its role is narrower.

SIPC doesn’t protect investors against market losses or guarantee investment performance. Instead, it helps customers recover missing assets when a member brokerage firm fails. Protection is limited to $500,000 per customer, including a $250,000 limit for cash claims.

SIPC was established under the Securities Investor Protection Act of 1970, and its protections apply only to customers of member brokerage firms.

Many common brokerage accounts qualify for SIPC protection, including individual, joint, and corporate accounts, as well as IRAs, certain trust and estate accounts, and accounts held by a guardian or estate executor.

Some brokerage firms carry private insurance that provides coverage beyond standard SIPC limits. Often referred to as excess SIPC coverage, these policies may protect customer assets above SIPC’s $500,000 limit, although coverage terms and limits vary by brokerage firm.

If a brokerage firm fails and customer assets are missing, SIPC may handle customer claims directly in smaller cases. Customers can then submit claims to recover eligible securities and cash without a court-supervised liquidation.

In larger or more complex cases, SIPC may seek a court-supervised liquidation and appoint a trustee to oversee the recovery process. The trustee reviews the brokerage firm’s records, notifies customers, and processes claims.

If customer accounts and records are intact, securities and cash are often transferred to another brokerage firm so customers can quickly regain access to their accounts. But if records are missing, disorganized, or affected by fraud, recovering customer assets may require additional investigation and legal action.

Yes, although such cases are rare. One of the best-known examples is the Ponzi scheme run by Bernie Madoff, in which many customer account statements reflected fictitious securities positions.

SIPC works to recover customers’ securities and cash based on legitimate account records. But when records contain fabricated trades, as they did in the Madoff case, determining what customers actually owned becomes far more difficult.

Market losses are a normal part of investing. SIPC exists to address a different risk: the possibility that a brokerage firm fails and customer assets are missing. Although brokerage failures are relatively rare, SIPC helps customers recover securities and cash when they occur. SIPC protects customer assets, not investment performance. In other words, it aims to protect what you own, but not what you earn in the market.