- published: 06 Jun 2013
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The Securities Investor Protection Corporation (SIPC, sometimes pronounced /ˈsɪpɨk/) is a federally mandated, non-profit, member-funded, corporation in the United States. It protects investors in certain securities from financial harm if a broker-dealer fails. It does not protect against losses in the securities markets, identity theft, or other 3rd-party fraud.
SIPC was born in the shadow of the "Paperwork Crunch" of 1968-70 as a means to restore confidence in the U.S. securities market. During this period,
In response, the Securities Investor Protection Act of 1970 was enacted as a way to quell investor insecurity and save the securities market from a financial crisis. In his introduction of the Securities Investor Protection Act to the floor of the Senate, Senator Edmund Muskie stated:
SIPC serves two primary roles in the event that a broker-dealer fails. First, SIPC acts to organize the distribution of customer cash and securities to investors. Second, to the extent a customer's cash and/or securities are unavailable, SIPC provides insurance coverage up to $500,000 of the customer's net equity balance, including up to $250,000 in cash. In order to state a claim, the investor is required to show that their economic loss arose because of the insolvency of their broker-dealer and not because of fraud, misrepresentation, or bad investment decisions.