How Safe Are Your Assets? The recent bank failure and general economic uncertainty has depositors and investors concerned about what banks funds are insured by the Federal Deposit Insurance Corp. (FDIC) and what protection is provided through the Securities Investor Protection Corporation (SIPC). We hope that you find the summary and links below beneficial in determining your level of protection or exposure. Are your deposits insured by FDIC? The general rule is that all deposit accounts worth $100,000 and less are automatically insured by the FDIC. Many retirement accounts, such as IRAs and 401(k)s, are insured to $250,000 per person. But since it's a person's aggregate deposits, and not their individual accounts, that are insured, any amounts over $100,000 deposited at any one bank are not covered. In a joint account, each depositor is insured up to $100,000. If depositors have more than $100,000 that they need to put in the bank, one way to protect the money is to hold accounts under that sum at a few separate banks. For those wanting to keep money at the same institution, perhaps for convenience's sake, a sound strategy is to open different accounts. However, there are drawbacks to this multiple-account, single bank approach. Depositors should make sure their accounts are properly titled at the bank. Bank employees may not always know the correct distinctions. To verify all accounts are FDIC-insured, contact the FDIC consumer hot line at 877-275-3342 or use the deposit insurance calculator at www.fdic.gov. Additionally, the FDIC has information about its insurance on its Web site, at: www.fdic.gov/deposit/deposits/insured/yid.pdf. SIPC Protection The Securities Investor Protection Corporation (SIPC) was created in 1970 as a non-profit, non-government, member-supported organization. Its primary function is to return funds and securities to investors if the broker-dealer holding these assets becomes insolvent. What SIPC Covers and What it Does Not Not all investments are protected by SIPC. In general, SIPC covers notes, stocks, bonds, mutual fund and other investment company shares, and other registered securities. However, SIPC coverage does not protect against losses from market fluctuations in portfolio value. It also does not cover instruments such as unregistered investment contracts, unregistered limited partnerships, fixed annuity contracts, currency, and interests in gold, silver, or other commodity futures contracts or commodity options. When SIPC Gets Involved When a brokerage is closed due to bankruptcy or other financial difficulties, SIPC will generally ask a court to appoint a trustee to supervise the liquidation of a SIPC member that is insolvent or cannot return customer cash or securities. Before satisfying its creditors, client claims would first be inventoried and distributed to them or to another broker-dealer using the cash and securities held by the firm in client accounts. In the event of a shortfall in customer assets, funds would then be advanced by SIPC or the trustee (up to $500,000 per client, of which $100,000 may be cash). The sources of money for the SIPC fund are assessments collected from SIPC members and from a line of credit at the U.S. Treasury. Some brokerage firms have coverage in addition to the above limits, provided by supplemental insurance. If your assets in one firm are greater than the above limits, you should obtain information from your broker as to your coverage. According to the SIPC, no fewer than 99 percent of persons who are eligible get their investments back from the SIPC. For this reason, it is important for investors to do business with firms that are members. SIPC maintains a database of valid members at their website. The SIPC also has a phone hot line which investors can call to determine the member status of a firm. For details, please refer to www.sipc.org or call (202) 371-8300. We have provided this information as a service to our clients and associates. It is neither a legal interpretation nor a statement of FDIC or SIPC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with your counsel. © 2007, Mallah Furman. All Rights Reserved.   The CPA licensure designation is regulated by the State of Florida.   The CVA designation is regulated by the National Association of Certified Valuation Analysts.   Privacy Policy | Legal Disclaimer | Site Map