SIPC
Insurance against broker failure - not against investment losses.
What is SIPC?
The Securities Investor Protection Corporation covers up to $500,000 per customer, including $250,000 in cash, if a member brokerage fails and customer assets are missing. It does nothing about a portfolio that simply lost value - a distinction clients misunderstand constantly.
SIPC: a worked example
If a broker collapses, SIPC restores your shares; if your shares fall 40%, SIPC is irrelevant.
More terms in Regulation & Professional Duty
Fiduciary Duty
A legal obligation to act in the client's best interest.
Suitability Standard
A recommendation must be appropriate given the client's profile.
Regulation Best Interest (Reg BI)
SEC rule requiring broker-dealers to act in a retail client's best interest.
Registered Investment Adviser (RIA)
A firm registered to give advice for a fee, holding fiduciary duty.
Broker-Dealer
A firm that executes trades as agent (broker) or principal (dealer).
FINRA
The self-regulatory organization overseeing broker-dealers.
Securities and Exchange Commission (SEC)
The federal agency regulating securities markets.
Securities Act of 1933
The 'truth in securities' law governing new issues.