SIPC covers $500,000 per account.
Limits of SIPC Coverage
SIPC is limited in the risks, amounts, and investments that it covers, as described below.
Market Risk Not Covered
SIPC does not protect against market risk, which is the risk inherent in a fluctuating market. It protects the value of the securities held by the broker-dealer as of the time that a SIPC trustee is appointed. Trustees are appointed through a SIPC-initiated court proceeding to supervise the liquidation of a SIPC member that is insolvent or cannot return customer cash or securities.
An example shows this risk: A broker is shut down owing a customer 100 shares of ABC stock that was worth $50 a share, for a total value of $5,000. Five months later when the SIPC trustee is appointed, the stock has dropped to $30 a share. SIPC coverage would be limited to either replacing the 100 shares of ABC or the $3,000 in cash that the customer’s stock is worth at the time of the appointment of the trustee. Conversely, if the stock rose to $70 a share when the trustee was appointed, SIPC would either give the customer 100 shares of ABC stock or, if the shares are not available, would give the customer $7,000. In short, the fluctuation in the value of the shares represents the market risk that is not covered by SIPC.
Dollar Limitations
SIPC coverage is also limited to $500,000 per customer, including up to $100,000 for cash. For purposes of SIPC coverage, customers are persons who have securities or cash on deposit with a SIPC member for the purpose of, or as a result of, securities transactions. For example, if a customer has 1000 shares of XYZ stock valued at $200,000 and $10,000 cash in the account, both the security and the cash balance would be protected. SIPC does not protect customer funds placed with a broker-dealer just to earn interest. Insiders of the broker-dealer, such as its, owners, officers, partners, are not customers for SIPC coverage.
Protected Investments
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. It 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.
It’s hard to see what would be covered in this ponzi scheme. Since the accounts probably never had any stock owned in them, to what are protected investors entitled? Maybe up to $500,000 of their original investment, but the compounded fraudulent returns? Seems hard to support that.
moreover, anyone who redeemed money out of the fund or closed a managed acct should not be spending that money yet as it will probably get clawed back as a fraudulent conveyance.
As for the 3:1 levered goofballs, they are toast. Thanks for playing. Maybe do a little due dilli next time. - Or: f you think you’re benefiting from someone’s cheating of someone else, think again.
So what's the uproar about? A securities firm's accounts are protected by SIPC? That's what the fund is for.