A client holds an individual account at a SIPC-member broker-dealer undergoing bankruptcy … — FINRA SIE (Securities Industry Essentials)

A client holds an individual account at a SIPC-member broker-dealer undergoing bankruptcy liquidation. At the time of liquidation, the account contains $150,000 in corporate bonds,$ 280,000 in uninvested cash, and $50,000 in commodity futures contracts. In dollars, what is the total maximum SIPC coverage amount provided for this account?

Answer: 400000 USD

Answer

The maximum total SIPC coverage amount provided for this individual account is $400,000.

SIPC provides protection up to

500,000 per separate customer capacity, including up to

250,000 for cash claims. The

150,000 in corporate bonds is fully covered as eligible securities. The

280,000 cash balance is capped at the maximum

250,000 cash limit. Commodity futures contracts are not covered by SIPC. Summing

150,000 in securities and

250,000 in cash gives a total protected amount of

400,000.

Step-by-Step Solution

Filter out non-covered assets

Commodity futures ($50,000) are excluded from SIPC coverage entirely.

SIPC protects securities and cash held in customer brokerage accounts, but commodity futures and fixed annuities are not securities under SIPC rules.

Calculate covered cash amount

Covered cash is capped at $250,000.

SIPC limits cash coverage to $250,000 per separate customer capacity, regardless of total uninvested cash held.

Calculate total protected amount

150,000 securities +

250,000 cash = $400,000.

Combining

150,000 in protected corporate bonds with

250,000 in protected cash yields

400,000, which does not exceed the overall

500,000 SIPC limit.

Key Concept

SIPC limits protection to

500,000 per separate customer capacity, with a maximum cap of

250,000 for cash claims. Non-securities such as commodity futures are not covered.

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