Comments on: SIPC Insurance Coverage: What Happens if Your Broker Fails?

By: Warren

Warren — Mon, 09 May 2011 01:15:15 +0000

Schwab has insurance from Lloyd’s of London in addition to SIPC but that insurance seems to be limited to $600 million for the whole company.

The reputability of your mutual funds is irrelevant. This is about Schwab mishandling your funds, perhaps illegally co-mingling them with their own. Pretty unlikely.

By: Ken Lerch

Ken Lerch — Thu, 14 Apr 2011 00:31:58 +0000

Does Schwab have higher limits of coverage? My IRA is over the limit, but all of it is in reputable mutual funds. They currently hold none of my stocks, but I am thinking of switching these (non-IRA) to their brokerage side. These are well under the SPIC limit.
Am I OK since the mutual fund families have my assets?

By: Su Ku

Su Ku — Sat, 30 Oct 2010 19:00:01 +0000

It seems SIPC currently covers up to $250,000 in cash. See below the statement from SPIC web site:
http://www.sipc.org/how/brochure.cfm

Terms of SIPC help.
Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered. After this first step, the firm’s remaining customer assets are then divided on a pro rata basis with funds shared in proportion to the size of claims. If sufficient funds are not available in the firm’s customer accounts to satisfy claims within these limits, the reserve funds of SIPC are used to supplement the distribution, up to a ceiling of $500,000 per customer, including a maximum of $250,000 for cash claims. Additional funds may be available to satisfy the remainder of customer claims after the cost of liquidating the brokerage firm is taken into account.

By: thewiseking

thewiseking — Wed, 17 Mar 2010 02:33:50 +0000

When Madoffâ€™s victims heard the news and got over their initial shock they were at first comforted by the SIPC seal on their statements. They were victims of fraud and theft who were failed by the SEC but it seemed their SIPC insurance would provide at least partial restitution.
What they have come to realize however is that SIPC is not on their side. SIPC has proven to be an adversarial organization which despite having been created by Congress to protect â€œmom and popâ€ investors has been hijacked by private practice bankruptcy attornies who are directly incentivized to deny claims and to clawback and revictimize the victims while â€œpreservingâ€ the meager funds the wall street firms paid to provide insurance in the first place. SIPC is a sham and a fraud entirely beholden to the brokerage industry.

Letâ€™s face it: unless the SEC and SIPC are revamped NOBODY has got our backs.

By: J. Brumley

J. Brumley — Thu, 21 May 2009 20:32:57 +0000

Good points to make. Investors should note that many brokerages voluntarily purchase additional insurance above and beyond the minimum required. Needless to say, those may be better choices if you’re unsure about your firm.

As B7 stated, reputation means everything – stick with the better names.

By: B7

B7 — Wed, 20 May 2009 03:15:42 +0000

Great post! The risks of the brokerage going bankrupt is often totally ignored.

There are other brokerage related risks as well. What happens if your account disappears? Or your deposit? Or a certain trade? What happens if someone transfers all the money out of your account?

It’s important to use a brokerage with a great rep. That might be the best way to mitigate these risks…