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Series 7: Seeks Business for the Broker-Dealer
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:

  1. Acovers custody failure up to limits, not investment losses✓ Correct answer
  2. Bguarantees principal on blue-chip stocks
  3. Creimburses all market losses in full
  4. Dapplies only to municipal bonds
Explanation

Why Acovers 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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