SIPC Coverage
The Securities Investor Protection Corporation — a nonprofit funded by member firms, not a government agency — restores customer assets when a broker-dealer fails: up to $500,000 per separate customer capacity, of which at most $250,000 may be cash.
The classic SIE item drops a dollar figure on you: a customer holds $600,000 in securities and $300,000 in cash at a failed firm — how much is protected? The answer is $500,000, because the cash sub-limit is carved inside the ceiling, not added on top. Cash counts first up to $250,000, leaving only $250,000 of the ceiling for securities — so $250,000 cash + $250,000 securities, with the customer a general creditor for the $400,000 shortfall (don’t mistake this for $550,000 by stacking cash on top). The other “tell” invites you to add IRA, joint, and individual balances together — don’t; each separate capacity gets its own full coverage.
Distinguish the neighbors by what they protect. SIPC restores custody when the firm fails; Reg S-P guards customer privacy, AML detects illicit money, and margin rules govern borrowing — none address insolvency. Memory hook: SIPC = Safety If Pieces (of the firm) Collapse, never a promise your stocks won’t fall.
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