Individual Protection when a Brokerage Firm Fails or Files for Bankruptcy
What Happens When a Broker Fails
When a brokerage firm closes for financial reasons and customer assets are not accounted for, SIPC works to return the customers’ assets. Prior to the development of SIPC, investors often lost assets when brokerages failed or were only able to regain their assets after considerable time and expense had been spent litigating the matter in court.
When to File a Claim with SIPC
Investors should be aware of two important deadlines if they are thinking about filing a claim with SIPC. The first deadline is the one set by the bankruptcy court. Typically, this is 60 days from the time that the notice of the bankruptcy proceeding is published. However, it can happen in as little as 30 days so it is important to file as quickly as possible. The second deadline is the one set by federal law. If an investor files a claim after the time set by the bankruptcy court but within six months of the publication of the bankruptcy preceding then the investor may be eligible for a payment although it may be delayed and less than the investor would have otherwise received.
What SIPC Does Not Do
SIPC is not meant to investigate nor combat alleged fraud that may have been committed by brokers or brokerage firms. SIPC does not insure any investments and does not cover losses in the stock market. Further, SIPC covers only cash and securities such as stocks and bonds. It does not provide protection for other investments such as commodities futures contracts or investment contracts.
The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.
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- What Are The Federal Securities Laws?
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- What Is The Securities Investor Protection Act?
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