Is Your Brokerage Safe?

Photo (cc) by dflorian1980

With all the talk of banks going under, what about your stock brokerage? If it fails, is your money insured?

As it turns out, brokerages are required to be members of the SIPC, or Security Investor Protection Corporation. It’s like the FDIC in a lot of ways, but unlike the FDIC, the SIPC is not backed by the federal government… it’s strictly funded by its members. Read about the difference between FDIC and SIPC.

The SIPC guarantees at least $100,000 in cash and half a million in securities, although many brokerages have even larger guarantees. So, unless you’re super-rich, odds are pretty good that you’ll never lose money because your brokerage goes belly up.

But remember, the SIPC only insures against bankruptcy, not a fall in market value. So when it comes to the safety of your broker, bank, or anyone else holding your savings, the rule is simple: when in doubt, check it out.

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