How SIPC Insurance Works

With the recent news surrounding E*Trade Financial, it may be time to take a look at how your holding with brokerage firms are protected.

Authorized by Congress in 1970, the SIPC was created to protect investors from fraud and theft by failed brokerage firm. Unlike the FDIC, the SIPC does not protect you from market losses, but rather works to return customer's cash and securities missing from customer's accounts in the event of a failure.

Let me point out that E*Trade is no fly-by-night firm and even if they were to fail, odds are the customer accounts would be handled without the need for SIPC involvement.

Coverage is $500,000 per account ($100,000 cash). For full details see: http://www.sipc.org/how/brochure.cfm