SIE practice questioneasySIPC Protection
What is the primary purpose of the Securities Investor Protection Corporation (SIPC)?
- ATo protect customers if a broker-dealer fails financially✓ Correct answer
- BTo regulate mutual fund fees
- CTo insure bank deposits up to $250,000
- DTo guarantee investors against market losses
Explanation
Why A — To protect customers if a broker-dealer fails financially
SIPC protects customers of SIPC-member broker-dealers if the firm fails financially, covering up to $500,000 per customer (including up to $250,000 in cash). SIPC does NOT protect against market losses — this is a critical distinction. The FDIC (not SIPC) insures bank deposits. SIPC coverage applies when a brokerage firm becomes insolvent, not when investments decline in value.
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