A retail client maintains a single individual account at a broker-dealer that becomes inso… — FINRA SIE (Securities Industry Essentials)

A retail client maintains a single individual account at a broker-dealer that becomes insolvent and enters SIPC liquidation. At the time of filing, the account holds $280,000 in uninvested cash and$ 150,000 in equity securities. What is the total dollar amount protected and covered by SIPC for this customer's account?

Answer: 400000 USD

Answer

SIPC will cover $400,000 in total for this account.

SIPC provides coverage for customer accounts at insolvent broker-dealers up to

500,000 total per separate customer, which includes a maximum cap of

250,000 for cash claims. In this scenario, the investor's

280,000 cash balance receives the maximum cash protection of

250,000. Combined with the

150,000 in equity securities (which are fully covered), the total protected amount is

250,000 +

150,000 =

400,000. This amount does not exceed the overall $500,000 total customer limit.

Step-by-Step Solution

Apply the SIPC cash coverage sub-limit

Cash coverage is capped at

250,000 (leaving

30,000 unprotected cash as a general creditor claim).

SIPC limits cash protection to a maximum of $250,000 per separate customer.

Calculate eligible securities coverage

Securities coverage is $150,000.

Securities are covered for their full value up to the overall SIPC total limit.

Combine cash and securities coverage and verify against the overall per-customer limit

250,000 +

150,000 = $400,000 total coverage.

The overall SIPC coverage limit per separate customer is

500,000. Since

400,000 is less than

500,000, the full

400,000 claim is protected.

Key Concept

SIPC Coverage Limits (

500,000 total per separate customer, including up to

250,000 for cash claims)

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