How SIPC Works and What Investors Should Know About It

The Securities Investor Protection Corp. will help get your cash and securities back if your broker-dealer fails. Here's a look at how SIPC works.

A hundred dollar bill with a lock on it.
(Image credit: Getty Images)

Extrapolating from letters we receive, it’s fair to say the Securities Investor Protection Corp. (SIPC) is one of the most misunderstood organizations in the investment world. 

SIPC was created by a 1970 federal law to protect investors against the loss of cash and securities when a member brokerage fails or runs into financial trouble. All registered broker-dealers, with a few exceptions, are SIPC members. But SIPC is not a government agency and has no regulatory or investigatory powers. It will not reimburse you if the value of your investment drops or if you are victimized by a fraud. 

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Kim Clark
Senior Associate Editor, Kiplinger's Personal Finance

Kim Clark is a veteran financial journalist who has worked at Fortune, U.S News & World Report and Money magazines. She was part of a team that won a Gerald Loeb award for coverage of elder finances, and she won the Education Writers Association's top magazine investigative prize for exposing insurance agents who used false claims about college financial aid to sell policies. As a Kiplinger Fellow at Ohio State University, she studied delivery of digital news and information. Most recently, she worked as a deputy director of the Education Writers Association, leading the training of higher education journalists around the country. She is also a prize-winning gardener, and in her spare time, picks up litter.