A financial advisor is reviewing regulatory protection rules for a client maintaining accounts at both a SIPC-member broker-dealer and an FDIC-insured commercial bank. Which of the following statements accurately describe the scope and coverage limits of SIPC and FDIC protection? (Select ALL that apply.)
- SIPC provides coverage up to 250,000 may be applied toward claims for uninvested cash.Answer
- FDIC deposit insurance covers bank deposit accounts up to $250,000 per depositor per insured bank, but does not cover non-deposit investment products such as stocks, bonds, or mutual funds.Answer
- CSIPC indemnifies investors against net portfolio valuation losses caused by sudden market declines prior to a firm entering bankruptcy.
- DCommodity futures contracts and fixed annuity products held inside a brokerage account are fully covered under standard SIPC equity limits.
Answer
The correct statements are that SIPC covers up to 250,000 cash claim limit) upon broker-dealer liquidation, and FDIC insures bank deposits up to $250,000 per depositor per insured institution while excluding securities.
SIPC coverage provides up to 250,000 for cash claims) during broker-dealer liquidation. In addition, FDIC insurance guarantees bank deposits up to $250,000 per depositor per insured institution while excluding investment securities like equities and mutual funds.
Step-by-Step Solution
Key Concept
SIPC protects against broker-dealer insolvency up to 250,000 cash cap) excluding market losses and commodities; FDIC protects bank deposits up to $250,000 excluding securities.