Series 7 practice questioneasyCustomer Contact and Communications 1
If a prospect asks whether a broker-dealer account is insured against market loss, the representative should explain that SIPC protection:
- Acovers custody failure up to limits, not investment losses✓ Correct answer
- Bguarantees principal on blue-chip stocks
- Creimburses all market losses in full
- Dapplies only to municipal bonds
Explanation
Why A — covers custody failure up to limits, not investment losses
SIPC protects customers when a broker-dealer fails financially and customer assets are missing, subject to statutory limits. It does not protect against declines in market value.
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