SIPC limits

[jerseygirl]

SIPC limits are $500,000/account
We’ve been consolidating accounts at Fidelity (IRAs, Roth IRAs and brokerage accounts) . Now the IRAs and brokerage accounts are more than $500,000. With the banking problems and now with ChRles Schwab starting to be concerned
Any others?

[Opti]

What are SIPC limits? For FDIC stuff remember the $250K is per account title and account type. So you could easily have $750K of coverage at one bank/financial institution. Do you know the SIPC rules?

Anything invested in stocks etc. are likely to be more unstable as they are more subject to changing market conditions, investor group think, and the Fed using their interest hammer to hit some interest rate which won't help as much as they think it will. 

[CCL]

What's going on with Charles Schwab?

Do you have everything in one name? Ours at Fidelity are split between both of us. I guess I'll have to do some research now.

[minnesotapaintlady]

Is it 500K per type of account?  So Roth brokerage, Taxable Brokerage, Rollover IRA brokerage, etc?

[jerseygirl]

Apr 17, 2023 10:53:17 GMT -5 minnesotapaintlady said:

Is it 500K per type of account?  So Roth brokerage, Taxable Brokerage, Rollover IRA brokerage, etc?

Yes $500,000 per account
Our IRAs are over $500,000 also brokerage not Roth (sadly)
So for my 3 accounts $500,000 x3. SIPC is $1,500,000 only

Same for Jerseyguy

[jerseygirl]

Apr 17, 2023 10:48:53 GMT -5 CCL said:

What's going on with Charles Schwab?

Do you have everything in one name? Ours at Fidelity are split between both of us. I guess I'll have to do some research now.

Charles Schwab same as SVBank - collateral lots of low interest bonds So CS bank in danger?? But brokerage, IRAs covered by SIPC

YES our brokerage are split but IRAs can only be individual

[CCL]

I just looked it up and found the same info from SIPC.

www.sipc.org/for-investors/investors-with-multiple-accounts

[CCL]

I wouldn't be too concerned about Charles Schwab Bank since, from what I found, they are FDIC protected.

I don't have that much $$$, but if I did, I would split it up between brokerages. There's no way I could leave that much unprotected.

I'm thinking you are a bit older than we are (60's). I'd also look for ways to spend some of it, pass some on to my kids, etc.

[jerseygirl]

Absolutely spending on family

[Rukh O'Rorke]

holy crap - can someone explain this to me?

If I have 1M in the sp500 through a brokerage - are you telling me that the brokerage could go belly up and I don't have 1M in sp500??

and then the sipc steps in and gives me 500k, but I'm out 500k?

[CCL]

Yes that's how it works. I think most of the bigger brokerages offer some sort of additional coverage. Fidelity offers coverage thru Lloyd's of London. I kinda doubt they'd have enough cash to reimburse all of Fidelity's accounts, though.

www.fidelity.com/why-fidelity/safeguarding-your-accounts

[minnesotapaintlady]

Apr 27, 2023 13:31:57 GMT -5 Rukh O'Rorke said:

holy crap - can someone explain this to me?

If I have 1M in the sp500 through a brokerage - are you telling me that the brokerage could go belly up and I don't have 1M in sp500??

and then the sipc steps in and gives me 500k, but I'm out 500k?

It doesn't really work the same with a brokerage as a bank where they are taking your money and loaning it out to other people.  The assets the brokerage is holding for the clients still exist and are just transferred to another firm if the brokerage fails.  I mean unless they're being really crooked and selling things off somehow or the assets never existed to begin with (aka Bernie Madoff).

[Rukh O'Rorke]

Apr 27, 2023 21:12:37 GMT -5 minnesotapaintlady said:

Apr 27, 2023 13:31:57 GMT -5 Rukh O'Rorke said:

holy crap - can someone explain this to me?

If I have 1M in the sp500 through a brokerage - are you telling me that the brokerage could go belly up and I don't have 1M in sp500??

and then the sipc steps in and gives me 500k, but I'm out 500k?

It doesn't really work the same with a brokerage as a bank where they are taking your money and loaning it out to other people.  The assets the brokerage is holding for the clients still exist and are just transferred to another firm if the brokerage fails.  I mean unless they're being really crooked and selling things off somehow or the assets never existed to begin with (aka Bernie Madoff).

thank you! so what assets does the sipc limits apply to? aka - when and how should an account holder worry?

[Rukh O'Rorke]

Apr 27, 2023 17:21:52 GMT -5 CCL said:

Yes that's how it works. I think most of the bigger brokerages offer some sort of additional coverage. Fidelity offers coverage thru Lloyd's of London. I kinda doubt they'd have enough cash to reimburse all of Fidelity's accounts, though.

www.fidelity.com/why-fidelity/safeguarding-your-accounts

wow - lloyds of london......

I think I remember reading about them in like period romance novels......legendary insurers!

[Rukh O'Rorke]

The market began in Lloyd's Coffee House, owned by Edward Lloyd, on Tower Street in the City of London.[6] The first reference to it can be traced to the London Gazette in 1688. The establishment was a popular place for sailors, merchants, and ship-owners, and Lloyd catered to them with reliable shipping news. The coffee house soon became recognised as an ideal place for obtaining marine insurance. The shop evolved into a meeting place for people of all types of maritime occupations. They would make bets on what ships would make it back to port. Soon, the captains on ships that were suggested to never come back were making bets on other ships that their ships would never came back. It was the start of insurance. During this time, it was a hotspot also frequented by mariners involved in the slave trade.[7] Historian Eric Williams noted that "Lloyd's, like other insurance companies, insured slaves and slave ships, and was vitally interested in legal decisions as to what constituted 'natural death' and 'perils of the sea'".[8] Lloyd's obtained a monopoly on maritime insurance related to the slave trade and maintained it until the abolition of the slave trade in 1807.[8]

Many years later, during the 2020 George Floyd protests, Lloyd's issued a statement, apologising "for the role played by the Lloyd's market in the 18th and 19th century slave trade — an appalling and shameful period of English history, as well as our own".[9][10][11][12]

[dannylion]

It is my understanding that SIPC insurance covers losses due to fraud, malfeasance, embezzlement, and things like that, and the $500k SIPC limit includes the $250k cash limit.  If a brokerage declares bankruptcy or otherwise ceases to function, client accounts are not included in assets available to settle any claims.  Client holdings are sequestered in another institution like a bank and the accounts would simply be sold to another brokerage intact.  

Here is the explanation from the Schwab website:  

"The first thing to remember is your securities—like stocks, bonds, mutual funds, exchange traded funds, or money market funds—held at Schwab are yours. The SEC's Customer Protection Rule safeguards customer assets at brokerage firms by preventing firms from using customer assets to finance their own proprietary businesses.



At Schwab, clients' fully paid securities are segregated from other firm assets and held at third party depository institutions and custodians such as the Depository Trust Company and Bank of New York. There are reporting and auditing requirements in place by government regulators to help ensure all broker-dealers comply with this rule. In the very unlikely event that Schwab should become insolvent, these segregated securities are not available to general creditors and are protected against creditors' claims."

Unless one's broker is dishonest or otherwise channeling Bernie Madoff, it looks like client securities are safe regardless of the fate of the brokerage.