The Federal Deposit Insurance Corporation (FDIC) is a US government agency that insures cash deposits at FDIC member banks, generally up to $250,000 per account. FDIC insurance does not cover other financial products and services that banks may offer, such as stocks, bonds mutual funds, life insurance policies, annuities or securities. The Securities Investor Protection Corporation (SIPC) is a nonprofit organization that protects stocks, bonds and other securities and oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble, and customer assets are missing. SIPC is not intended to provide insurance coverage for embezzlement by advisors. It is designed primarily to protect against the insolvency of the institution or system.
The SIPC will cover up to $500,000 in cash and securities, including a $250,000 limit for cash held in a brokerage account. Certain assets are not eligible for SIPC protection. Among the assets typically not eligible for SIPC are commodity futures contracts, precious metals, as well as investment contracts (such as limited partnerships) and fixed annuity contracts not registered with the US Securities and Exchange Commission under the Securities Act of 1933. SIPC was not chartered by Congress to combat fraud and is not the securities world equivalent of the FDIC, which insures depositors of insured banks.
Delays of several months can arise to satisfy a claim, when the failed brokerage firm’s records are not accurate. It also is not uncommon for delays to take place when the troubled brokerage firm or its principals were involved in fraud