Elena maintains accounts across two separate financial institutions: an FDIC-insured comme… — FINRA SIE (Securities Industry Essentials)

Elena maintains accounts across two separate financial institutions: an FDIC-insured commercial bank and a SIPC-member broker-dealer.

At Beacon Commercial Bank, she holds:
• An individual checking account with $\$170,000$ in cash
• An individual savings account with $\$110,000$ in cash

At Crestview Securities (broker-dealer), she holds:
• An individual brokerage account containing $\$180,000$ in equity securities, $\$290,000$ in uninvested cash, and a $\$35,000$ silver futures contract
• A joint brokerage account with her brother (Tenants in Common) containing $\$380,000$ in corporate bonds and $\$70,000$ in uninvested cash

If both financial institutions fail and enter liquidation, what is the total combined dollar amount of coverage provided by FDIC and SIPC insurance across all of Elena's accounts?

$1,130,000Answer
B
$1,170,000
C
$1,205,000
D
$930,000

Answer

The total combined dollar amount of FDIC and SIPC protection across all accounts is $1,130,000.

FDIC insures deposit accounts up to

250,000 per depositor per bank for each ownership capacity. At Beacon Commercial Bank, the individual checking (

170,000) and savings (

110,000) accounts fall under the single ownership category (

280,000 total), capping FDIC protection at

250,000. Under SIPC rules, individual and joint accounts represent distinct customer registration capacities, each eligible for up to

500,000 in total protection (including a maximum of

250,000 for cash claims). Commodity futures contracts are not protected by SIPC. For the individual brokerage account, the

35,000 silver futures contract is excluded, and cash protection is capped at

250,000, yielding

430,000 (

180,000 stocks +

250,000 cash) of SIPC coverage. For the joint account, the full

450,000 (

380,000 bonds +

70,000 cash) is protected because cash is below

250,000 and total assets are below

500,000. Combining coverage across all accounts gives

250,000 +

430,000 +

450,000 = $1,130,000.

Step-by-Step Solution

Calculate FDIC coverage for accounts held at Beacon Commercial Bank.

Checking (

170,000) and savings (

110,000) are combined under the single ownership category for a total deposit balance of

280,000. Because FDIC coverage is capped at

250,000 per depositor, per insured bank, for each ownership category, FDIC protection is $250,000.

FDIC aggregates all deposits owned by the same individual in the same capacity at a single bank.

Calculate SIPC coverage for the individual brokerage account at Crestview Securities.

The

35,000 silver futures contract is ineligible for SIPC protection (

0 coverage). The

290,000 cash balance is subject to the

250,000 SIPC cash coverage cap. Adding the

180,000 in equity securities yields total account coverage of

180,000 +

250,000 =

430,000 (which is within the $500,000 total SIPC limit per separate customer).

SIPC protects up to

500,000 per separate customer, of which no more than

250,000 may be for cash claims; commodity futures are not securities and are non-covered.

Calculate SIPC coverage for the joint brokerage account at Crestview Securities.

The joint account represents a separate customer registration capacity from the individual account. The account holds

380,000 in corporate bonds and

70,000 in cash (

450,000 total). Because cash (

70,000) is under

250,000 and total assets (

450,000) are under

500,000, the full

450,000 is covered by SIPC.

Joint accounts are recognized as distinct legal customer capacities with their own separate $500,000 SIPC limit.

Sum the total protected amounts across all accounts.

250,000 (FDIC) +

430,000 (SIPC Individual) +

450,000 (SIPC Joint) =

1,130,000.

Combines total eligible coverage across both institution liquidations.

Key Concept

SIPC vs. FDIC Protection and Coverage Limits

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