SIPC ProtectionSIPC
SIPC protection restores customers' cash and securities, up to $500,000 including $250,000 in cash, if a SIPC-member brokerage firm fails. It does not protect against investment losses from falling prices.
What happens to your stocks if your broker goes bankrupt? In the US, SIPC — the Securities Investor Protection Corporation — steps in to return missing customer assets, up to set limits. It's often called insurance, but it works differently from bank deposit insurance and covers a very specific risk. This entry explains what SIPC covers and what it doesn't.
- Category
- Market Structure
- Reading time
- 3 min
- Also called
- SIPC, Securities Investor Protection Corporation, SIPC coverage
- Updated
SIPC in plain words
SIPC is a non-profit corporation created by Congress that works to restore investors' cash and securities if their brokerage firm fails.1
Protection is limited to $500,000, including a $250,000 limit for cash.1
Money market funds held at a brokerage are protected as securities by SIPC, which is different from FDIC insurance of bank deposits.2
How SIPC protection works, step by step
A member broker fails
And customer assets are missing.
A trustee is appointed
To liquidate the firm.
Assets are returned
Customer property first.
SIPC fills gaps
Up to $500,000 per customer.
Cash limit applies
Up to $250,000 of the total.
Market losses aren't covered
Price drops are your risk.
Worked examples
Example 1 — Covered shortfall
RestoredYour broker fails; $80,000 of your $300,000 in securities is missing.
| Shortfall | $80,000 |
| SIPC covers | Up to $80,000 (within limit) |
SIPC works to restore customers' cash and securities when a brokerage fails.1
Example 2 — Over the cash limit
$150k at risk$400,000 of uninvested cash is missing at a failed broker.
| Cash limit | $250,000 |
| Uncovered | $150,000 |
The $500,000 limit includes a separate $250,000 cap on cash.1
Example 3 — Market loss
Not coveredYour stocks fall 30% in a crash; your broker is fine.
| SIPC payout | $0 |
SIPC protection is limited to broker failure; investment losses aren't covered. See Bear Market.
SIPC vs FDIC
| Aspect | SIPC | FDIC |
|---|---|---|
| Covers | Missing assets at a failed broker | Bank deposits at a failed bank |
| Limit | $500,000 ($250,000 cash) | $250,000 per depositor, per bank |
| Market losses | Not covered | Not applicable |
| See also | Broker accounts | Certificate of Deposit |
When SIPC matters
Choosing a broker
Check SIPC membership. See Broker Regulation.
Large accounts
Consider limits and excess coverage.
Cash balances
Watch the $250k cash cap. See Cash Account.
Crypto
Many crypto assets aren't covered. See Custodial Wallet and Self-Custody.
Advantages and disadvantages
Advantages
- Protects against broker failure.
- Covers securities and cash.
- Funded by member firms.
Disadvantages
- Doesn't cover market losses.
- Limits may be too low for large accounts.
- Excludes some assets like unregistered digital assets.
Going deeper
Read as far as you need. Each level builds on the one before it.
Not investment insurance
Beginner
SIPC protection is limited; it doesn't protect against declines in the value of your investments.1
Digital assets
Intermediate
SIPC doesn't protect digital asset securities that are unregistered investment contracts.1 See Cryptocurrency.
Segregation first
Advanced
Because brokers must keep customer assets separate, most failures return assets in full before SIPC money is needed. See Segregated Client Accounts.
Common mistakes
Calling it insurance against losses
It only covers broker failure.
Holding too much cash
Cash cap is $250,000.
Assuming crypto is covered
Often it isn't.
Confusing SIPC with FDIC
Different protections.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- SIPC restores assets if a member broker fails.
- Limit: $500,000, including $250,000 cash.
- Market losses aren't covered.
- It differs from FDIC bank insurance.
- Some assets, like many digital assets, are excluded.
Frequently asked questions
Is my brokerage account FDIC-insured?
Who funds SIPC?
Do brokers offer extra protection?
Further learning
- FINRA
The broker regulator.
- Money Market Fund
SIPC vs FDIC for cash.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- SIPC. What SIPC Protects (opens in a new tab) Checked .
- FINRA. Taking a Look at Money Market Funds (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.