What Does SIPC Cover If My Stock Broker Goes Bankrupt?

Trading Basics & Risk · Published November 10, 2026 · By the UXS editorial team

Most investors only think about SIPC when a broker is in the news. It is worth knowing in advance what it does, because it is narrower than "insurance" suggests, and also stronger in the case it is built for.

What people on X are asking

In April 2025 an investor explained they were moving money market funds from a broker to a bank because if a broker goes bust there's only private SIPC insurance, while bank funds have federal FDIC insurance. In August 2025 a market-structure commentator asked what happens if a broker goes bust, warning of a long wait and a potentially small payout, citing the Lehman timeline from 2008 to 2022. And in June 2025 a post pointed out that shares you lend out are not covered by SIPC protection. Each has a piece of the truth.

The fact-checked answer

What SIPC is. SIPC describes itself as a non-profit corporation created by Congress; it was set up under the Securities Investor Protection Act of 1970 after a wave of broker-dealer failures. Most US broker-dealers must be members. Its job is to recover missing customer assets when a member firm fails financially. So the X post's "private" label is half right: SIPC isn't a government agency or a government-backed insurer like the FDIC, but it is a statutory body, not a commercial insurer.

The limits. SIPC says it protects up to $500,000 per customer, including up to $250,000 in cash, and that non-US citizens are treated the same as US citizens. Limits apply per separate capacity: an individual account, a joint account, an IRA, a Roth IRA, a trust account and a corporate account at the same firm each get their own $500,000. Two individual accounts in your own name at one firm are combined.

What SIPC covers and doesn't (per SIPC)

From SIPC's "What SIPC protects" and "Investors with multiple accounts" pages. Bank deposits are covered separately by the FDIC up to $250,000 per depositor, per bank, per ownership category. Tap a column header to sort.


Stocks, bonds, Treasury securities	Yes, if missing when the broker fails
CDs, mutual funds, money market funds	Yes
Cash in the brokerage account	Yes, up to $250,000 within the $500,000
Fall in market value, worthless stocks	No
Bad advice or unsuitable recommendations	No
Forex	No
Commodity futures and options on futures	No, unless in a securities portfolio margining account
Crypto or investment contracts not registered with the SEC	No
Shares lent out under a fully paid lending program	No; broker disclosures note they lose SIPC protection

SIPC vs FDIC, and the money market fund point. The FDIC covers deposits: checking, savings, money market deposit accounts and CDs at insured banks. It lists mutual funds, stocks, bonds and Treasuries as not covered. A money market fund is a mutual fund, so moving one to a bank's investment arm doesn't make it FDIC-insured; only moving cash into a bank deposit account does. SIPC itself stresses it isn't the same as FDIC protection, because SIPC never protects the value of a security.

UXS decision diagram

What happens if my broker fails?

Text version of the diagram

Is the firm a SIPC member? If no: SIPC does not apply; check your contract and the firm's regulator
Are customer assets all there (segregated as required)? If yes: Accounts are usually transferred to another broker; you keep your holdings
Are assets missing? If yes: A trustee runs a claims process and returns customer property pro rata
Is your remaining shortfall within $500,000 per capacity ($250,000 cash)? If yes: SIPC advances funds to make up the missing securities and cash
Otherwise: Market losses are never covered; only missing assets

Diagram drawn by UXS. A simplified decision aid for education, not a recommendation.

What Lehman actually showed. The X post is right that Lehman's liquidation took years. But SIPC's track record page says that by the close of Lehman Brothers Inc. in 2022, the trustee had achieved a 100% distribution to customers: $105.7 billion to more than 111,000 customers through account transfers and claims. General unsecured creditors got about 41%. Customer property is returned ahead of general creditors, and much of it reached customers through account transfers rather than claims. SIPC also says that since 1970 it advanced $3.6 billion to make possible the recovery of $143.8 billion for an estimated 773,000 investors.

Lent shares. If you join a fully paid securities lending program, the lent shares leave your protected account; brokers' program disclosures state those shares aren't covered by SIPC, though they typically hold collateral. The X post is correct. Read the disclosure before opting in.

Practical steps. Check membership on FINRA's BrokerCheck or SIPC's member list. Keep large amounts across capacities or firms if you exceed the limits. Remember the risks SIPC doesn't touch: a crash, a bad stock, margin calls, or crypto exchanges, which usually aren't SIPC members; see what crypto custody risks look like and whether to buy a Bitcoin ETF or bitcoin directly. For brokers outside the US, see are prop firms regulated for why the regulator matters.

Margin loans bring their own risks; see what happens if you can't meet a stock margin call.

Margin loans change what you owe your broker; see cash account vs margin account for beginners.

Decision helper

Your situation	SIPC relevance
Stocks and ETFs at a US member broker	Covered against broker failure
Over $500k in one capacity	Consider splitting
Forex or futures account	Not covered by SIPC
Crypto exchange	Usually not covered

Common mistakes

Thinking SIPC covers market losses.
Assuming a money market fund is FDIC-insured.
Adding all accounts together when capacities are separate.
Ignoring that lent shares lose SIPC protection.

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