SIPC and FDIC
The Securities Investor Protection Corporation (SIPC) differs from the Federal Deposit Insurance Corporation (FDIC) in several ways.
The SIPC is a private organization created in 1970 by the Securities Investor Protection Act to replace specific amounts of missing cash, stocks, & bonds for customers of brokerage firms that have closed. The SIPC’s replacement is intended to protect investors from the cost and time delay of legal disputes to reclaim their securities from a failed brokerage.
The SIPC does not bail out investors for normal market losses on their investments. The SIPC does not cover worthless securities, commodity futures contracts, fixed annuity contracts, currency, or investments in contracts (such as Limited Partnerships) which are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.
When the failed brokerage firm’s funds are insufficient to satisfy customer account claims, the SIPC supplements the distribution of assets up to a maximum of $500,000 per customer, including $100,000 for cash claims.
For additional information, visit the SIPC website: www.sipc.org
The FDIC, on the other hand, preserves public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions up to $250,000 (through December 31, 2013) per depositor. This higher ceiling was raised temporarily from the $100,000 limit on October 3, 2008.
Deposits held in different categories of ownership – such as single or joint accounts – may be separately insured.
The FDIC is an independent agency of the federal government, managed by a five-person Board of Directors, appointed by the President and confirmed by the Senate. The FDIC is funded by earnings on investments in U.S. Treasury securities, and by premiums that participating banks and thrift institutions pay for their coverage. The FDIC was created in 1933 in response to thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.
For additional information, visit the FDIC website: www.fdic.gov
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