Quick answer
If a SIPC-member brokerage fails and customer assets are missing, SIPC helps restore cash and securities up to $500,000 per customer capacity, including a $250,000 limit for cash. It does not protect against a decline in the value of your investments or bad investment advice [1].
Key points
- SIPC is a non-profit corporation created by Congress under the Securities Investor Protection Act of 1970.
- The limit is $500,000 per separate capacity, of which no more than $250,000 can be cash.
- SIPC protects the custody of your assets — not their market value.
- Accounts held in the same capacity at one firm are combined; different capacities, such as individual, joint and IRA, are protected separately.
- FDIC insurance covers bank deposits up to $250,000 per depositor, per bank, per ownership category, and does not cover stocks, bonds or mutual funds.
#What is SIPC?
SIPC, the Securities Investor Protection Corporation, describes itself as "a non-profit corporation created by Congress" that works "to restore investors' cash and securities if their brokerage firm fails" [2]. The law behind it is the Securities Investor Protection Act of 1970, which established "a body corporate to be known as the 'Securities Investor Protection Corporation'" [3].
The key word is custody — the job of holding your assets safely. In SIPC's words: "SIPC protection is limited. SIPC only protects the custody function of the broker dealer" [1]. It is a safety net for the case where your broker collapses and your assets are not where they should be. It is not a promise about how your investments will perform.
#How much does SIPC protect?
The exact wording on sipc.org is: "The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash" [1]. So if your account holds only cash, the most SIPC can advance for that account is $250,000; if it holds securities, or securities and cash, the overall ceiling is $500,000.
That limit applies per separate capacity — a legal way of saying "per type of account ownership". SIPC lists capacities including individual, joint, corporate, trust, traditional IRA, Roth IRA, estate and guardianship accounts, and states that "Accounts held in the same capacity are combined for purposes of the SIPC protection limits" [4]. Two individual accounts in your name at the same firm share one $500,000 limit; your individual account and your IRA each get their own.
Worked example
Applying the limits to one family's accounts
Imagine a SIPC-member firm fails and, in the worst case, every asset in these accounts is missing and nothing is recovered from the firm. The family holds three accounts in three different capacities.
- Individual: stocks $300,000 + cash $50,000
- Protected $350,000 of $350,000
- Joint with spouse: funds $400,000
- Protected $400,000 of $400,000
- Traditional IRA: bonds $180,000 + cash $320,000
- Protected $430,000 of $500,000
- IRA cash above the cap ($320,000 − $250,000)
- $70,000 not covered by SIPC
- Family total held vs. maximum SIPC protection
- $1,250,000 vs. $1,180,000
Each capacity gets its own limit, but cash inside each capacity is capped at $250,000. The IRA's large cash balance is what leaves $70,000 outside SIPC's limit.
Hypothetical figures, calculated in Python using the published $500,000 / $250,000 limits. In a real liquidation, customers first share in the customer property the trustee recovers; SIPC advances then fill gaps up to the limits.
#What does SIPC not cover?
This is where many beginners go wrong. SIPC does not protect against the "decline in value of your securities" or losses from "bad investment advice" [1]. If you buy a stock for $100,000 and it falls to $70,000, the $30,000 drop is a market loss, and SIPC plays no part in it — whether or not your broker is healthy.
Some assets are outside SIPC protection even if the firm is a member. SIPC lists commodity futures contracts, foreign exchange trades, unregistered investment contracts, and digital asset securities that are unregistered investment contracts as not protected [1]. Its brochure adds investments held at a firm that is not a SIPC member, non-security crypto or digital assets, stablecoins and fixed annuity contracts [5].
| Generally protected | Not protected |
|---|---|
| Stocks and bonds | A fall in market value |
| Treasury securities | Losses from bad investment advice |
| Certificates of deposit held at the broker | Commodity futures contracts |
| Mutual funds and money market mutual funds | Foreign exchange trades |
| Cash in the account (up to $250,000) | Non-security crypto assets and stablecoins |
#What happens if your brokerage firm fails?
According to SIPC's guide, when the SEC or FINRA finds a member firm is in or approaching financial difficulty, they refer it to SIPC, which may ask a federal court to appoint a trustee to liquidate the firm [5]. Eligible customers share in the customer property the trustee collects, and because that can take time, "the Trustee uses funds 'advanced' by SIPC to return customers' cash and securities, up to the limits of SIPC protection" [5].
How a SIPC liquidation usually unfolds
#How is SIPC different from FDIC insurance?
The FDIC, the Federal Deposit Insurance Corporation, insures bank deposits. Its standard coverage is "$250,000 per depositor, per FDIC-insured bank, for each account ownership category" [6]. It covers checking and savings accounts, money market deposit accounts and certificates of deposit — but it lists stock investments, bond investments, mutual funds, annuities, US Treasury securities and crypto assets as not insured [6].
SIPC vs FDIC in one view
SIPC (brokerage accounts)
- Restores missing cash and securities when a member broker fails
- Up to $500,000 per capacity, cash capped at $250,000
- No protection from market losses
FDIC (bank deposits)
- Insures deposits when an insured bank fails
- $250,000 per depositor, per bank, per ownership category
- Does not insure stocks, bonds or mutual funds
A practical point: a "money market mutual fund" at a broker is a security that SIPC may protect if the broker fails, while a "money market deposit account" at a bank is a deposit covered by the FDIC [1] [6]. Neither protects you if the fund itself loses value.
#How can you check whether a firm is a SIPC member?
SIPC tells investors to look for its official symbol or the statement "Member SIPC" in a brokerage firm's advertising, and to confirm membership through sipc.org [5]. Because a logo is easy to copy, also confirm the firm's registration through the official databases in our guide to checking a broker.
Common beginner mistakes
Thinking SIPC protects against losses
SIPC does not cover a fall in prices. Market risk is yours whether the broker is healthy or not — see types of investment risk.
Assuming every account gets its own $500,000
Accounts in the same capacity at the same firm are combined. Two individual accounts share one limit.
Parking large cash balances at one broker
Cash is capped at $250,000 per capacity. Large cash balances above that are not fully within SIPC's limit.
Mixing up SIPC and FDIC
Bank deposits fall under the FDIC; securities at a broker fall under SIPC. Stocks are never FDIC-insured.
What's the bottom line?
SIPC is a narrow but important safety net: if a member brokerage firm fails and your assets are missing, it helps restore them up to $500,000 per capacity, with cash capped at $250,000. It does nothing about falling prices, and it is not the same as FDIC insurance for bank deposits. Understanding that boundary helps you see which risks you still carry — including the extra risk of borrowing to invest, covered in margin accounts explained.
Frequently asked questions
Is SIPC a government agency?
SIPC describes itself as a non-profit corporation created by Congress. It was established by the Securities Investor Protection Act of 1970.
Does SIPC cover crypto?
SIPC lists non-security crypto or digital assets, stablecoins, and digital asset securities that are unregistered investment contracts as not protected.
Are my IRA and my regular brokerage account protected separately?
Yes, if they are in different capacities. SIPC lists individual accounts, traditional IRAs and Roth IRAs as separate capacities, each with its own $500,000 limit including up to $250,000 in cash.
If my stock falls 30%, can I claim from SIPC?
No. SIPC does not protect against a decline in the value of your securities. It only helps when a member firm fails and customer assets are missing.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- Securities Investor Protection Corporation. What SIPC Protects (2026). Accessed 2026-10-03.A
- Securities Investor Protection Corporation. About SIPC (2026). Accessed 2026-10-03.A
- Securities Investor Protection Corporation. Securities Investor Protection Act of 1970 (2026). Accessed 2026-10-03.A
- Securities Investor Protection Corporation. Investors with Multiple Accounts (2026). Accessed 2026-10-03.A
- Securities Investor Protection Corporation. How SIPC Protects You (investor brochure) (2026). Accessed 2026-10-03.A
- Federal Deposit Insurance Corporation. Understanding Deposit Insurance (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
