1.1.3 Other Regulators and Agencies

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.