Securities Investor Protection Corporation - SIPC

SIPC. Say it fast and it’ll protect you, fast. SIPC. Securities. Investor. Protection. Corporation. It’s an intentionally non-profit corporation, which basically insures your assets. Like...investments in stocks and bonds, which are held at a brokerage firm...which is, um…troubled.

The SIPC exists because, in the past, brokerage firms have, in fact, gone bankrupt. Sometimes its customers then lose everything they had with that fly-by-night brokerage, and the notion that investors can’t trust the people to whom they are giving their life savings is a very bad notion.

It has to be protected at all costs, or it means the death of trust in the financial system of America, at which point things get very, very bad. Today, the SIPC limit is 500 grand, with half of that being protections against cash holdings. The rest covers investments in stocks and bonds.

If you have more money than that at a given brokerage, and they should disappear, well, too bad for you. Because the U.S. is such a kindly, loving place, both citizens and non-citizens are protected under SIPC, and this is a very good idea, because it encourages foreign investors to trust the U.S. system, often more deeply than they trust their home country.

Note that the SIPC mandate is not to protect bad stock picks, bonds that don’t keep up with inflation, or lousy advice from that slick-talking broker with great hair and NBA tickets always ready for you and your family. So if this set of definitions or protections sounds familiar, it should. The SIPC is kissing cousins with the FDIC, or Federal Deposit Insurance Corporation because the FDIC is, in fact, sensitive to the protection of the value of securities you have invested with it.

And if you care about this crap, we have a whole opus video on the FDIC. Good luck staying awake for the whole thing...