What happens when a brokerage shuts down

Posted: January 18, 2013

Q: If I open a brokerage account and the brokerage goes bankrupt or closes, what happens to my account?

- M.W., Lafayette, Ind.

A: Most brokerages carry Securities Investor Protection Corporation insurance, protecting your account for up to $500,000, including up to $250,000 in cash claims. (Many carry additional insurance, too.)

This doesn't protect you against a loss in value of your holdings. Instead, it protects against the financial failure of broker-dealers. To ensure that a brokerage is SIPC-protected, check its website for assurance or call it up and ask. Learn more about the SIPC at sipc.org.

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