A client's margin brokerage account at a SIPC-member broker-dealer undergoing liquidation … — FINRA SIE (Securities Industry Essentials)

A client's margin brokerage account at a SIPC-member broker-dealer undergoing liquidation holds $220,000 in corporate bonds,$ 290,000 in uninvested cash, and $45,000 in commodity futures contracts. What is the total dollar amount protected by SIPC for this customer?

Answer: 470000 USD

Answer

$470,000

SIPC provides protection against broker-dealer failure up to

500,000 per separate customer, with cash coverage capped at

250,000. Commodity futures contracts are not covered by SIPC. Therefore, coverage consists of

220,000 in corporate bonds plus

250,000 in cash (capped from

290,000), giving a total protected amount of

470,000.

Step-by-Step Solution

Identify and exclude assets not covered by SIPC

Commodity futures contracts (

45,000) receive

0 SIPC protection.

SIPC covers cash and securities; commodity futures, physical commodities, and fixed annuities are explicitly excluded from coverage.

Apply the SIPC cash sublimit

Cash protection is limited to $250,000.

SIPC caps cash coverage at

250,000 per separate customer, leaving the remaining

40,000 cash balance as an unsecured general creditor claim.

Calculate total eligible protection for cash and securities

220,000 (bonds) +

250,000 (protected cash) = $470,000.

Securities are covered up to the overall SIPC coverage cap.

Compare total claim to overall SIPC maximum per customer

Total SIPC protection provided is $470,000.

The calculated total claim of

470,000 does not exceed the overall SIPC limit of

500,000 per separate customer.

Key Concept

SIPC Coverage Limits and Asset Eligibility

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