Rule 9 of 11 in this unit1.1.3

1.1.3 Other Regulators and Agencies

SIE outline 1.1.3

SIPC: $500,000, $250,000 of It Cash

Protects cash and securities at a failed SIPC-member brokerage. $500,000 total, $250,000 cash sub-limit. NOT unlimited, NOT all cash.

The trick

Common trap: SIPC will cover me if my stock goes down. Correct: SIPC protects cash and securities held by a customer at a financially-troubled SIPC-member brokerage firm, up to $500,000 total with a $250,000 limit for cash. In SIPC's own words it does not protect against a “decline in value of your securities”. Hunt the stem for 'failed' or 'insolvent'. No failed firm, no SIPC. A stem that only says the stock dropped is testing this exact trap.

The trick

Common trap: SIPC covers losses when your stock drops in value. Correct: SIPC covers custody loss at a failed member firm only. A falling stock is never a SIPC claim.

The method for this kind of question
  1. Name the agency, then the one number

Now answer

1 question 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 1Harder

A customer's mutual fund shares, purchased at a bank, lose value after that bank itself fails. Which protection scheme, if any, covers this loss?

How sure are you?

Correct: C. The FDIC's own not-covered list names mutual funds directly, and buying them at a bank does not change that. SIPC responds only to a failed SIPC-member brokerage, and no brokerage failed here.
A. Being purchased at a bank does not turn a mutual fund into an insurable deposit.
B. SIPC responds to a failed brokerage firm, not a failed bank; being a security is not, by itself, enough.
D. Invents a split coverage mechanism neither fund provides.

Unit: SIE outline 1.1.3

Next ruleFDIC: $250,000 Per Bank, Deposits Only

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