Global Securities Markets: Navigating the World's Exchanges and OTC Markets

PROTECTION OF CUSTOMER ASSETS BY SIPC AND EXCESS SIPC COVERAGE

If the distribution of customer name securities and customer property from the broker-dealer does not satisfy a customer's overall net equity claim, the Securities Investor Protection Corporation (SIPC), which administers SIPA, provides protection of up to $500,000 per customer, except that only $100,000 of the SIPC protection can be applied toward a loss of a cash balance carried in an account at an insolvent broker-dealer. If a customer's net equity claim remains unsatisfied after the distribution of customer name securities and customer property and the payment of the SIPC funds, the customer becomes an unsecured creditor and will be paid out of any remaining assets of the broker-dealer's estate. A broker-dealer may obtain private insurance to cover customer losses in excess of the amounts paid. This private insurance is referred to as excess SIPC and applies to assets held in custody at the broker-dealer, subject to contractually imposed limits.