What is the purpose of SIPC insurance? Given the late 1980s experience of bankin
ID: 3144158 • Letter: W
Question
What is the purpose of SIPC insurance? Given the late 1980s experience of banking and savings and loan deposit insurance programs, under what conditions might SIPC insurance be expected to be effective? Under what conditions might it fail to accomplish its objectives.? What is the purpose of SIPC insurance? Given the late 1980s experience of banking and savings and loan deposit insurance programs, under what conditions might SIPC insurance be expected to be effective? Under what conditions might it fail to accomplish its objectives.? What is the purpose of SIPC insurance? Given the late 1980s experience of banking and savings and loan deposit insurance programs, under what conditions might SIPC insurance be expected to be effective? Under what conditions might it fail to accomplish its objectives.?Explanation / Answer
SIPC protects against the loss of cash and security – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Most customers of failed brokerage firms when assets are missing from customer accounts are protected. There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a brokerage firm that is a member of SIPC.
SIPC protection is limited. SIPC only protects the custody function of the broker dealer, which means that SIPC works to restore to customers their securities and cash that are in their accounts when the brokerage firm liquidation begins.
SIPC does not protect against the decline in value of your securities. SIPC does not protect individuals who are sold worthless stocks and other securities. SIPC does not protect claims against a broker for bad investment advice, or for recommending inappropriate investments.
It is important to recognize that SIPC protection is not the same as protection for your cash at a Federal Deposit Insurance Corporation (FDIC) insured banking institution because SIPC does not protect the value of any security.
Investments in the stock market are subject to fluctuations in market value. SIPC was not created to protect these risks. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investment falls for any reason. Instead, in a liquidation, SIPC replaces the missing stocks and other securities when it is possible to do so.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.