What agency insures investors against brokerage firm failures?

What agency insures investors against brokerage firm failures?

• A. Securities Investor Protection Corporation
• B. Securities Exchange Commission
• C. Financial Industry Regulatory Authority
• D. National Association of Securities Dealers

Answer: (A)

The Securities Investor Protection Corporation, or SIPC, is the agency responsible for insuring investors against the failure of brokerage firms. This protection is particularly important in the case of the bankruptcy or insolvency of a brokerage firm, which can lead to the loss of customer securities and funds. SIPC coverage helps to restore customer claims to a certain limit, typically up to $500,000, which includes a $250,000 limit for cash claims. This assurance allows investors to have confidence that their assets are safeguarded up to these limits, thereby promoting stability and trust in the financial system. The other mentioned agencies have different roles. The Securities and Exchange Commission (SEC) primarily oversees and regulates the securities markets to protect investors, maintain fair markets, and facilitate capital formation. The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that oversees brokerage firms and exchange markets to promote fairness and transparency. Lastly, the National Association of Securities Dealers (NASD), which is now part of FINRA, used to serve a similar regulatory purpose as FINRA does today. None of these agencies provide the direct insurance protection for investors that SIPC does.

The Securities Investor Protection Corporation, or SIPC, is the agency responsible for insuring investors against the failure of brokerage firms. This protection is particularly important in the case of the bankruptcy or insolvency of a brokerage firm, which can lead to the loss of customer securities and funds. SIPC coverage helps to restore customer claims to a certain limit, typically up to $500,000, which includes a $250,000 limit for cash claims. This assurance allows investors to have confidence that their assets are safeguarded up to these limits, thereby promoting stability and trust in the financial system.

The other mentioned agencies have different roles. The Securities and Exchange Commission (SEC) primarily oversees and regulates the securities markets to protect investors, maintain fair markets, and facilitate capital formation. The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that oversees brokerage firms and exchange markets to promote fairness and transparency. Lastly, the National Association of Securities Dealers (NASD), which is now part of FINRA, used to serve a similar regulatory purpose as FINRA does today. None of these agencies provide the direct insurance protection for investors that SIPC does.