How SIPC Protects You
|February 28 2011|
THE ROLE OF SIPC
When a brokerage is closed due to bankruptcy or other financial difficulties and customer assets are missing, SIPC steps in as quickly as possible and, within certain limits, works to return customers’ cash, stock and other securities, and other customer property. Without SIPC, investors at financially troubled brokerage firms might lose their securities or money forever…or wait for years while their assets are tied up in court.
However, because not everyone, and not every loss, is protected by SIPC, you are urged to read this whole brochure carefully to learn about the limits of protection.
WHAT SIPC COVERS… and what it does not
How are SIPC and the FDIC different? When a member bank fails, the FDIC insures all depositors at that institution against loss up to a certain dollar limit. The FDIC’s no-questions-asked approach makes sense because the banking world is “risk averse.” Most savers put their money in FDIC-insured bank accounts because they can’t afford to lose their money.
That is precisely the opposite of how investors behave in the stock market, in which rewards are only possible with risk.
Most market losses are a normal part of the ups and downs of the risk-oriented world of investing. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investments falls for any reason. Instead, SIPC replaces missing stocks and other securities where it is possible to do so...even when investments have increased in value.
SIPC does not cover individuals who are sold worthless stocks and other securities. SIPC helps individuals whose money, stocks and other securities are stolen by a broker or put at risk when a brokerage fails for other reasons. ...
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AVOIDING INVESTMENT FRAUD
SIPC urges all investors to understand the dangers of investment fraud and where to turn for help if swindled. That is why SIPC works with regulatory and self-regulatory agencies, consumer groups, and other concerned parties to increase investor awareness about scams.
Check out the investment fraud warnings on the following Web sites:
You can find a list of the best investment fraud education resources on the Web by visiting SIPC on the Web at www.sipc.org, and see “Protecting Yourself Against Fraud”
|Last Updated ( February 28 2011 )|
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