SIPC

What it means

The Securities Investor Protection Corporation is to brokerages what deposit insurance is to banks, and the analogy misleads in one important way. It protects against the firm failing and customer assets going missing. It does not protect against an investment losing value, which is the loss people actually fear.

Where a member firm fails, the scheme arranges the transfer of customer accounts to another firm, and makes good missing securities and cash up to a statutory limit per customer, with a lower sub-limit for cash. Most accounts transfer intact and the limit never comes into it.

"Per customer" is the part worth understanding for an estate. Accounts held in different legal capacities — an individual account, a joint account, an estate's account, a trust's account — are generally treated as separate customers, so an estate opening an account at the same firm is not simply adding to an existing balance.

Membership is compulsory for most brokerages and is worth checking for anything that is not one. The scheme does not cover commodity futures, most fixed annuities, or currency.

Why it matters

An executor consolidating several brokerage accounts is making a decision about concentration, and the limits are per customer rather than per account.

It is also the answer to a real fear — that money in a brokerage might simply disappear — and the answer is bounded rather than unlimited.

When you are likely to meet it

• When moving inherited securities between firms.
• When an estate opens a brokerage account of its own.
• When somebody asks whether an investment account is insured.

Related terms

• Deposit insuranceThe federal guarantee on money held in a bank or credit union, which continues for a period after the account holder dies.
• Employer identification number for an estateA tax identification number for the estate itself, which becomes its own taxpayer once the person's Social Security number stops being usable.
• Non-probate assetSomething that passes to a new owner automatically, without a court.
• Transfer on death (TOD)A designation that passes an asset directly to a named person when the owner dies, without probate.
• Transfer agentThe company a corporation employs to keep its share register and to move shares from one owner to another.

Official sources

The authority this page describes, at the agency that publishes it. Sahvelo does not restate a rule from a secondary source.

• SIPC — what it protects (opens in a new tab)

Sahvelo guidance that uses this

• Investment accounts after a death