1.1.6.2. SIPC Coverage Limitations
When a brokerage firm is a member of SIPC, it means that the firm’s customers’ assets are protected against the firm going bankrupt. If the firm fails, the customers get back all securities that are registered in their name and those securities that are in the process of being registered. The firm’s customer assets are then divided among customers in proportion to the size of their remaining claims.
If these funds are not sufficient to satisfy the claims, SIPC will supplement up to $500,000 per “separate customer,” with a maximum of up to $250,000 cash. SIPC can also borrow up to $1 billion from the SEC if necessary.
Total coverage can be higher for multiple accounts owned by the same person if the accounts are considered to be held by separate customers. There are five categories of separate customers defined by SIPC. These categories include:
• Individual accounts
• Joint accounts
• Accounts held by executors, administrators, and guardians/custodians/conservators (suc