Regulatory organization, SIPC


SIPC (Securities Investor Protection Corporation) is a nonprofit organization that protects the rights of investors. The financial regulator SIPC was formed in 1970 by the decision of the US government and according to the Law on the protection of investors. The purpose of SIPC is not interference in the disputes between the brokers and its clients, and compensation of losses of investors as a result of bankruptcy of a brokerage company included in the registry the SEC (securities and U.S. markets). In connection with this was established a compensation Fund, which is replenished by contributions of the companies involved in SIPC. To date, the size of the compensation Fund is more than $ 2.5 billion. Thanks to this Fund, clients of the companies involved in SIPC can expect to receive compensation as a result of bankruptcy of a brokerage company of up to 500 thousand dollars in securities, of which up to 100 thousand dollars in cash positions.

The financial regulator SIPC has the following powers:

  • In the event of bankruptcy of a broker SIPC may request the appointment of a Trustee to implement the bankruptcy of the company and protect the interests of its clients. Sometimes regulatory organization, SIPC can directly protect the interests and rights of clients, especially smaller brokerage firms;

  • By the decision of the SIPC the customer accounts of a bankrupt company may be transferred to another brokerage company that is a member of SIPC, which significantly saves time and money during the transition to a new broker. However, if the client does not agree with the decision of the SIPC, he will be able to choose a broker in its sole discretion;

  • If the broker did not conduct the reporting, and the transfer of client accounts is not possible, customers receive all of their securities, and the funds are distributed proportionately among clients depending on the amount of invested funds;

  • Once the process of bankruptcy of the broker to be completed, SIPC will now begin its consideration of the claims of the clients and their parolevitarine from the compensation Fund Corporation.

Thus, the financial regulator SIPC serves an additional guarantee in case of bankruptcy of the broker-dealer and maintains investor confidence in the us stock market.