Under what circumstances could a broker-dealer firm share in a financial loss with a customer?

SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Most customers of failed brokerage firms are protected when assets are missing from customer accounts. There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a SIPC member brokerage firm.

SIPC protection is limited. SIPC only protects the custody function of the broker dealer, which means that SIPC works to restore to customers their securities and cash that are in their accounts when the brokerage firm liquidation begins.

SIPC does not protect against the decline in value of your securities. SIPC does not protect individuals who are sold worthless stocks and other securities. SIPC does not protect against losses due to a broker's bad investment advice, or for recommending inappropriate investments.

It is important to recognize that SIPC protection is not the same as protection for your cash at a Federal Deposit Insurance Corporation (FDIC) insured banking institution because SIPC does not protect the value of any security.

Investments in the stock market are subject to fluctuations in market value. SIPC was not created to protect these risks. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investment falls for any reason. Instead, in a liquidation, SIPC replaces the missing stocks and other securities when it is possible to do so.

How is my cash protected:

SIPC protects cash in a brokerage firm account from the sale of or for the purchase of securities. Cash held in connection with a commodities trade is not protected by SIPC. Money market mutual funds, often thought of as cash, are protected as securities by SIPC. SIPC protects cash held by the broker for customers in connection with the customers’ purchase or sale of securities whether the cash is in U.S. dollars or denominated in non-U.S. dollar currency.

What are securities:

SIPC protects stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds and certain other investments as "securities." SIPC does not protect commodity futures contracts (unless held in a special portfolio margining account), or foreign exchange trades, or investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

For a more detailed explanation, consult the definition of “security” in the Securities Investor Protection Act, section 78lll(14):

The term “Security” means any

• note,
• stock,
• treasury stock,
• bond,
• debenture,
• evidence of indebtedness,
• any collateral trust certificate, preorganization certificate or subscription,
• transferable share,
• voting trust certificate,
• certificate of deposit
• certificate of deposit for a security, or
• any security future as that term is defined in section 78c(a)(55)(A)  of this title,
• any investment contract or certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or mineral royalty or lease (if such investment contract or interest is the subject of a registration statement with the Commission pursuant to the provisions of the Securities Act of 1933 [15 U.S.C. 77a et seq.]),
• any put, call, straddle, option, or privilege on any security, or group or index of securities (including any interest therein or based on the value thereof), or
• any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency,
• any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase or sell any of the foregoing, and
• any other instrument commonly known as a security.

Except as specifically provided above, the term “security” does not include any

• currency, or
• any commodity or related contract or futures contract, or
• any warrant or right to subscribe to or purchase or sell any of the foregoing.

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• Resources for Investors
• FAQs

Frequently Asked Questions

HAVE I CONTACTED THE RIGHT AGENCY?

If your question concerns securities and investing - Yes! We can answer your questions and concerns regarding the registration status of securities, broker-dealers, and investment advisers. Our office, however does not give investment advice, recommendations or referrals.

If you have questions concerning certificates of deposit (CDs), bank trust departments, trust companies, mortgage brokers, consumer credit, or loans, contact the Missouri Division of Finance at 573-751-3242 or go to http://finance.mo.gov/

If you have questions concerning consumer products or services, contact the Missouri Attorney General's Consumer Protection Division at 800-392-8222 or go to http://ago.mo.gov/

If you have questions concerning insurance products or services, contact the Missouri Department of Insurance, Financial Institutions and Professional Registration at 800-726-7390 or go to http://www.insurance.mo.gov/

If you have questions concerning Social Security, contact the Social Security Administration at 800-772-1213.

HOW DO I SELECT A GOOD STOCKBROKER? HOW DO I KNOW IF MY BROKER IS REPUTABLE?

Learn the ABC's of Investing: Ask Questions, Beware of Fraud and Call the Investor Hotline! Although we cannot recommend one company over another, we can tell you whether a firm or individual agent is registered in the State of Missouri, and we can also provide you their disciplinary history, if any. Visit the publications section for publications that will help you learn what questions to ask as you search for brokerage firms and investment advisers. After you have selected a few potential options, contact the Missouri Securities Division and ask for a CRD report.

I THINK I HAVE BEEN DEFRAUDED IN AN INVESTMENT. CAN YOU HELP ME?

If someone has violated the law, we want to know. The Missouri Securities Division

DO I HAVE GROUNDS FOR A COMPLAINT? IF SO, WHAT SHOULD I DO NEXT?

Typically, market losses on an investment are not grounds for a complaint. However, if you perceive that something dishonest or unethical has happened with your account, you should take these steps:

1. Send a letter describing the problem to the branch manager or compliance officer of your broker-dealer or investment adviser. Use information from your account statements and reports to support your claim. Keep a copy of the letter for your records.

2. If the problem is not corrected, contact the Missouri Securities Division

   
   to file a complaint
   
   .

I FOUND AN OLD STOCK CERTIFICATE - HOW DO I FIND OUT IF IT STILL HAS ANY VALUE?

First, contact the secretary of state's office in the state in which the business was incorporated to verify that the company is still in business. If the company has gone out of business, the stock likely has no value. However, if the company has merged with another company or simply changed its name, the stock may still have value.

Next, check with a broker-dealer to see if they have any information about the issuing company or contact the Corporations Division

I LOST MY STOCK CERTIFICATE - WHAT DO I DO?

Contact the broker-dealer from whom you purchased the stock.

THERE HAS BEEN A DELAY IN RECEIVING MY STOCK CERTIFICATE. WHAT CAN I DO?

Contact your broker-dealer or issuer. Today, many stock investments are held in "street name" at the broker-dealer. Your purchase confirmation and account statements are your evidence of ownership (along with the broker-dealer's records). If you still wish to have a stock certificate, contact your broker-dealer or issuer.

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