The same combination occurs when a single client holds two individual taxable accounts. Two IRA accounts held by the same client would be considered one legal entity and thus are combined for purposes of insurance coverage. The following would qualify as separate legal entities, each subject to the $500,000 limit: your individual account, your trust, your IRA, your spouse’s individual account, trust and IRA, your joint account, as well as a custodial account for a child. In such circumstances SIPC provides up to $500,000 of protection on securities held per legal entity and up to $250,000 in cash in excess of what is not recovered, per legal entity. Keep in mind SIPC only steps in when a firm shuts down due to financial circumstances in which customer assets are missing. When a brokerage firm is closed due to bankruptcy or other financial difficulties and client assets are missing, SIPC steps in to help return clients’ cash, stock and other securities. They will begin to make more sense as we proceed. Your advisor’s custodian pursues proprietary trading.Your securities are held in street name at the DTC.Your advisor keeps very little cash in your account.SIPC is to brokerage accounts what the FDIC is to bank accounts.īefore we dive into a lot of detail about the how and what of SIPC we want to surface these far more important considerations about your brokerage accounts, whether: The Securities Investment Protection Corporation (SIPC) is a nonprofit, membership corporation, funded by its member securities broker-dealers that was created 42 years ago to restore funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms. Simply put there are exceptionally few cases where investors have lost money due to a brokerage firm going out of business. In fact it has seldom been used over the 42 years it has been available. You might be surprised to learn SIPC insurance is quite irrelevant when it comes to asset protection.

Prospective clients often ask why they should trust Wealthfront to manage more than $500,000 of their assets if SIPC insurance only covers up to that amount.

Fdic and sipc limits