Are Brokerage Accounts Insured? SIPC, FDIC, and Cash Limits

Brokerage accounts are insured, but not the way bank accounts are. Two separate programs apply. The Securities Investor Protection Corporation (SIPC) covers up to $500,000 per customer in securities and cash held at a failed brokerage, with a $250,000 cap on the cash portion. Any uninvested cash swept into a partner bank picks up Federal Deposit Insurance Corporation (FDIC) coverage of up to $250,000 per bank. Neither program reimburses you for investment losses when the market drops or a stock pick goes bad.

What SIPC Actually Protects

SIPC is a nonprofit corporation created by the Securities Investor Protection Act of 1970 and funded by its member broker-dealers.¹ Nearly every registered broker-dealer is a member by law. When a member firm fails and cannot meet its obligations to customers, SIPC initiates a liquidation proceeding and a court-appointed trustee works to return client property.

Before insurance even comes into play, SEC Rule 15c3-3 requires broker-dealers to hold fully paid customer securities in their possession or control and to keep customer cash in a special reserve bank account that cannot be used for the firm’s own purposes.² Your shares and bonds are supposed to remain identifiable as yours even if the firm goes under. SIPC’s job is to make sure you actually get them back. When specific shares are missing from the firm’s accounts, SIPC uses its reserve fund to buy replacement shares on the open market when possible.³

The statutory ceiling is $500,000 per customer in total advances, with a sub-limit of $250,000 for cash claims.⁴ “Cash claims” means money sitting in your account as a cash balance rather than invested in securities. An account holding $400,000 in stocks and $200,000 in cash would see the full $400,000 in stock covered, but only $250,000 of the cash, leaving $150,000 unprotected on the cash side alone.

Stretching Coverage Across Multiple Accounts

The $500,000 limit applies per customer in each “separate capacity,” not per account. An individual brokerage account, a traditional IRA, and a Roth IRA at the same firm each qualify as a separate capacity, so coverage can reach $1.5 million across the three.⁵ Joint accounts, corporate accounts, trust accounts, and guardianship accounts for minors each count as additional separate capacities.

Multiple accounts held in the same capacity get combined. Two individual brokerage accounts at the same firm, one for trading and one for long-term holdings, share a single $500,000 pool rather than getting $500,000 each.⁵ A married couple with a joint account plus one individual account each would have three separate capacities at the same firm, each protected up to the full limit.

FDIC Coverage on Cash in a Brokerage Account

Most brokerage firms run a cash sweep program that automatically moves uninvested cash into deposit accounts at one or more partner banks.⁶ Once cash lands in an FDIC-insured bank, it picks up standard deposit insurance of $250,000 per depositor, per bank, per ownership category.⁷ Firms that spread cash across several partner banks can produce much higher effective coverage. A sweep program using five banks can carry up to $1.25 million in FDIC-insured cash.

Not all sweep programs go to banks. Some firms default to money market fund sweeps, which invest idle cash in a money market mutual fund rather than depositing it in a bank. Money market funds are investment products, not deposit accounts, and they are not FDIC-insured.⁶ Check your account settings or sweep disclosure to confirm which type you have.

One trap: if you already hold personal accounts at any of the sweep program’s partner banks, those deposits count toward the same $250,000 limit at that bank. FDIC coverage looks at the depositor and the bank, not at which brokerage sent the money there.

What Neither Program Covers

SIPC does not reimburse you because your investments lost value. If you own 100 shares and the price falls from $50 to $5, SIPC makes sure you still have the 100 shares. It does not restore the lost value, even if the issuer goes bankrupt and the stock becomes worthless.³ The same applies to bond defaults, fund closures, and general market downturns. Those are investment risks you bear.

Several product types sit outside SIPC’s statutory definition of a “security.” Commodity futures contracts, foreign exchange trades, and cash connected to commodities trades are all excluded.³ Fixed annuities and limited partnerships not registered with the SEC under the Securities Act of 1933 are also left out.

Cryptocurrency gets no SIPC coverage unless it meets the federal definition of a security. The SEC has said directly that SIPC protection does not extend to non-security crypto assets held by a SIPC member, and that even crypto structured as an investment contract falls outside SIPA’s definition of “security” unless it is the subject of a registration statement filed under the Securities Act of 1933.⁸ FINRA has flagged firms for making misleading statements to customers about SIPC coverage for crypto.⁹ A traditional securities account and a crypto account at the same brokerage are not protected identically.

Losses caused by a broker’s unsuitable recommendations or poor judgment also fall outside SIPC.³ Those disputes run through FINRA’s arbitration process, where member firms must participate.¹⁰ If you spot an error on a trade confirmation or statement, complain in writing right away by letter or email. SIPC warns that failure to complain in writing can compromise your eligibility if the firm later enters liquidation, since you may need to prove the firm’s records were wrong.¹¹

Excess of SIPC Coverage for Larger Accounts

For investors whose balances exceed the $500,000 statutory limit, many large brokerage firms carry supplemental private insurance known as “Excess of SIPC” coverage. These policies, often underwritten by syndicates at Lloyd’s of London, kick in only after SIPC’s limits have been fully exhausted.

Terms vary widely. Some firms advertise per-account limits of $25 million or more, but the policy typically has an aggregate cap across all the firm’s customers combined. If hundreds of clients file claims at once, that aggregate limit gets shared. Unlike SIPC, excess coverage is a private contract with an insurer, not a federal entitlement, and the payout depends on the insurer’s claims-paying ability. Review your brokerage’s account protection disclosures for per-customer limits and the aggregate cap.

If Your Brokerage Fails: Deadlines That Matter

When SIPC steps in, the trustee publishes a liquidation notice, and two deadlines start running from that date. The first, usually 30 or 60 days, is the window for requesting that the trustee return your actual securities. File within that window and the trustee must deliver your shares unless they are unavailable and cannot be purchased in an orderly market. A second deadline of six months applies under SIPA. File after the first deadline but within six months and the trustee can choose whether to return securities or pay their cash value, whichever costs less. Claims filed after six months are denied as untimely.¹²

During a liquidation, expect to be locked out of your account. You generally cannot trade, withdraw funds, or transfer positions while the proceeding is active.¹³ If you hear your firm is in trouble, don’t wait. Monitor SIPC’s website for liquidation notices and file your claim early.

Checks Worth Running on Your Own Account

Confirm SIPC membership through the member directory at sipc.org before opening an account.¹⁴
Look at your sweep settings and disclosure to see whether idle cash goes to a bank sweep (FDIC-insured) or a money market fund sweep (not FDIC-insured).
Identify the specific partner banks holding your swept cash, usually listed on your monthly statement or in the sweep program disclosure, and compare them against any personal bank accounts you already hold.
Read your firm’s account protection page to find any Excess of SIPC terms, including per-customer caps and the aggregate limit.
Put any complaint about a trade error or statement discrepancy in writing immediately, and keep the record.¹¹

1
Office of the Law Revision Counsel. 15 USC Chapter 2B-1 – Securities Investor Protection
2
eCFR. 17 CFR 240.15c3-3 – Customer Protection Reserves and Custody of Securities
3
SIPC. What SIPC Protects
4
Office of the Law Revision Counsel. 15 USC 78fff-3 – SIPC Advances
5
SIPC. Investors with Multiple Accounts
6
U.S. Securities and Exchange Commission. Cash Sweep Programs for Uninvested Cash in Your Investment Accounts – Investor Bulletin
7
Office of the Law Revision Counsel. 12 USC 1821 – Insurance Funds
8
U.S. Securities and Exchange Commission. Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology
9
FINRA.org. FINRA Annual Regulatory Oversight Report – Member Firms Nexus to Crypto
10
FINRA. Arbitration and Mediation
11
SIPC. Protecting Yourself Against Fraud
12
U.S. Securities and Exchange Commission. Investor Bulletin – SIPC Protection Part 2 Filing a SIPC Claim
13
FINRA.org. If a Brokerage Firm Closes Its Doors
14
SIPC. List of Members