Rule 1 of 11 in this unit1.1.3

1.1.3 Other Regulators and Agencies

SIE outline 1.1.3

The reading

Five to ten minutes on this one unit: what the exam wants, the idea in plain words, then straight into the trap and the practice.

The outline wants five more regulators placed correctly (Treasury and the IRS, NASAA, the Fed's Regulation T) and, above all, the exact SIPC and FDIC dollar limits kept straight.

Five names round out the regulatory picture beyond the SEC and its three SROs, and the outline groups them as one bullet each. Treasury and the IRS is one bullet, not two, and it quietly absorbs FinCEN (the anti-money-laundering unit) and OFAC (the sanctions-list office) inside it; neither gets its own line on the exam. NASAA is not a regulator with its own rulebook at all, it is the association the fifty state securities regulators belong to, the layer beneath the SEC and FINRA this exam otherwise spends most of its time on. The Federal Reserve's own Board of Governors writes Regulation T, the rule setting margin credit, and its own text sets fifty percent as a floor, the percentage set by the regulatory authority where the trade occurs, whichever is greater, never a ceiling.

The two names that carry a dollar figure are the ones the exam confuses on purpose, because they sound alike and protect completely different things. SIPC exists for one scenario only: a brokerage firm fails financially. It protects the cash and securities held at that firm, up to five hundred thousand dollars total per customer, and within that total, no more than two hundred fifty thousand of it can be the cash portion. SIPC's own page is explicit about what it does not do: it never protects against a decline in the value of your securities. It replaces what a failed firm's own custody lost, never what the market took.

The FDIC protects something else entirely: a deposit at an FDIC-insured bank, two hundred fifty thousand dollars per depositor, per bank. Its own published list of what it does not cover names stocks, bonds, mutual funds, annuities and municipal securities directly. A security, in a bank's own name or not, has never once been FDIC-covered.

One more duty travels with SIPC rather than a dollar figure: FINRA Rule 2266 requires written notice of SIPC membership at account opening and again at least once a year, and where an introducing firm and a clearing firm both service an account, the rule lets the two of them assign that duty to just one.

SIPC and FDIC protection limits, side by side SIPC (brokerage) $500,000 total $250,000 cash sub-limit per customer, per firm FDIC (bank) $250,000 deposits only per depositor, per bank A security is never FDIC-covered
SIPC covers custody at a failed brokerage; the FDIC covers deposits at a bank. Different institution, different number, different thing protected.

The trap

The word 'insurance' pulls a candidate toward SIPC covering a bad investment. SIPC's own page lists a decline in the value of your securities as something it explicitly does not protect; it replaces custody a failed firm lost, never a loss the market itself caused.

Now answer

2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Exam level

A customer's SIPC-member brokerage firm fails. Which statute created SIPC?

How sure are you?

Correct: B. SIPC exists under the Securities Investor Protection Act of 1970.
A. The 1934 Act created the SEC's authority over markets and firms; it did not create SIPC.
C. That statute registers investment advisers, an unrelated body.
D. That statute governs pooled investment vehicles, not the brokerage-failure protection fund.

Unit: SIE outline 1.1.3

Question 2Harder

Which two offices are packaged inside the outline's single "Department of the Treasury/IRS" bullet, rather than listed as separate items?

How sure are you?

Correct: B. FinCEN (anti-money-laundering) and OFAC (sanctions) both sit inside the single Treasury/IRS bullet. Neither has its own line on the outline.
A. NASAA and FINRA are each their own outline items, well outside the Treasury/IRS bullet.
C. The SEC and CBOE belong to the SEC and SRO items covered in the previous lesson, not this bullet.
D. SIPC and the FDIC are each their own separate line on the outline, with their own dollar figures.

Unit: SIE outline 1.1.3

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