SIPC is the most misread acronym in investing: people hear “insurance” and file it next to FDIC, as if it protects their portfolio. It doesn’t. Knowing precisely what SIPC covers — and the three things it never covers — changes how you read every brokerage’s fine print.
What SIPC actually does
The Securities Investor Protection Corporation steps in when a member brokerage fails and customer assets are missing. It restores securities and cash up to $500,000 per customer (including a $250,000 limit on cash), by capacity — so an individual account and an IRA at the same broker can each have coverage. The scenario it exists for is broker insolvency combined with missing assets: rare, because customer assets are required to be segregated in the first place.
The three things it never covers
Market losses — your portfolio dropping 40% is investing, not a SIPC event. Bad advice or fraud in what you were sold — wrong products, unsuitable recommendations, Ponzi returns are matters for regulators and courts, not SIPC. And non-securities — crypto held outside registered securities frameworks, futures in most cases, and anything at an entity that isn’t a SIPC member at all. That last one is the scam vector: fake platforms love the word “insured,” so verify membership itself (sipc.org has a member search, and our Verifier flags the registration questions to ask first).
SIPC vs FDIC in one line each
FDIC: your bank deposit is protected against the bank failing, up to $250K, dollar-for-dollar. SIPC: your brokerage assets are protected against the broker failing with assets missing — not against those assets losing value. Platforms with cash sweep programs (explained here) route idle cash from SIPC-land into FDIC-land via partner banks — legitimate, but it means which protection applies depends on where your money slept last night. Read the disclosures; that sentence is this whole site in miniature.