Is Your Money Safe? FDIC and SIPC Coverage Basics


Reading the news this morning, it’s hard not to rush out and buy a hollow mattress. What happens to your deposits when a bank, or a brokerage, goes broke? In the United States we have some protection for both of these scenarios in the form of FDIC and SIPC insurance.

FDIC – $100,00 Per Bank

FDIC insurance covers your deposits in retail banks, the places you keep your checking and savings accounts, along with certificates of deposit. In the unlikely event your bank goes belly up, your deposits are insured up to $100,000. In the unlikely event you have more than $100,000 sitting around in liquid assets, it’s still pretty easy to ensure it’s all covered by the FDIC, you simply spread it out among more than one institution.

Most people with more than $100,000 lying around most often invest it in stocks or bonds through a brokerage account, which are not covered by the FDIC.

SIPC – Coverage For Cash and Securities Not Yet Registered

If you make regular investments in a brokerage account or 401k and hold onto your stocks and bonds for any length of time, they are most likely safe. Of course, there is no insurance to protect against market losses. However, if you had all your investments at Lehman Bros. and they were unable to find a buyer, your investments would still be intact because Lehman Bros. was really just a facilitator. As long as your securities are registered in your name, or in the process of being registered, you own them – no matter what happens to the brokerage. You’d just need your statements to prove it.

If you keep a lot of cash in your brokerage account, or trade frequently, you may have larger amounts of money that would be subject to SIPC coverage. In that case there is a ceiling of $500,000 you can recoup for lost assets, and cash losses are capped at $100,000. 

The SIPC released a statement earlier today stating they had not initiated a liquidation proceeding against Lehman Bros. and did not expect to.

What’s the Difference?

Aside from the different coverage these two organizations provide, the big difference between the FDIC and the SIPC is that the FDIC is an independent agency of the federal government backed by the full faith and credit of the United States government  and the SIPC – although created by a Congressional act is neither a government agency nor a regulatory authority. It’s a nonprofit, membership corporation, funded by its member securities broker-dealers.

Do you feel better now? Or are mattress sales about to get a big boost?


    What happens when fraud is involved, as in the Maddoff case unfolding? If I’ve rec’d monthly statements for years, actual transaction slips for all trades, withdrawn monies intermittently without delay for years, deposited monies receipted in a timely fashion, is there any protection for the $850,000 my last statement reflects? How do I know if there is any cash balance really there? How do I know if there were ever real transactions executed? How would I get a snapshot of what securities and cash were long in the account when the SEC froze the assets in the account? Pls advise. Thanks. David Ranzer, 561-265-0773;

  • Lela Davidson

    Mr. Ranzer,
    It’s my understanding that in a case of fraud you are protected (up to $500,000) by SIPC (so long as the firm was a member) but that in general it takes longer to recover assets.

    See this press release from SIPC on the Madoff case:

    I hope this helps.

  • J&D Ranzer

    Ironically, I just saw this after all this time! We were able to recover about 45% of our Madoff losses; The largest amount came from SIPC for $305000 and the balance of $110000 came from amending prior tax returns where we paid cap. gains on phantom profits, so we were entitled to get that back. We were denied almost $500000 left to us in a Madoff account by my father when he died, because he had taken out more than he put in over the years. The IRS would not let us claim more than 75% of the total amount of cap gains paid by us, so I am wondering if there is any way to use than going forward for 2010 and beyond? Also, do you know the status of tghe law suits seeking to change Picard’s definition of net deficit equity; the last would hold SIPC responsible for the last statement’s value up to $50000. Thanks for your input. I am at or would be happy to talk with you at 561 265 0773. Thanks again in advance; Joanne and David Ranzer