What happens to your investments if your brokerage fails (SIPC)

What if Fidelity, Schwab, or Robinhood went under — do your investments go with it? Mostly, no, and the reason isn't insurance. Your stocks and funds aren't the brokerage's property; they're yours, held segregated in your name (technically 'street name' for your benefit). If the broker collapses, your assets are supposed to be sitting there intact, ready to transfer to a new custodian. SIPC exists for the ugly cases where 'supposed to' fails.

The first line of defense: segregation, not insurance

SEC customer-protection rules require brokers to keep customer securities and cash segregated from the firm's own money. The firm can go bankrupt while customer assets remain whole — creditors of the brokerage cannot touch them. In the typical brokerage failure, accounts are simply transferred in bulk to a healthy firm within days to weeks; customers keep every share. SIPC steps in when the ugly exception happens: assets are missing because of fraud, theft, or record-keeping collapse.

What SIPC covers — and the numbers

• Coverage: up to $500,000 per customer, per brokerage, per account 'capacity' — of which at most $250,000 can be cash.
• Separate capacities count separately: your individual account, your IRA, your Roth, and a joint account each get their own $500,000.
• Covered: stocks, bonds, ETFs, mutual funds, Treasuries held at the broker — when they've gone missing in the failure.
• It replaces missing securities in kind where possible — you get your shares back, not a check for what they were once worth.
• Most large brokers also buy 'excess of SIPC' private insurance covering hundreds of millions or more per customer above the SIPC limits.

What SIPC will never cover

This is where people get burned. SIPC protects against missing assets when a broker fails — it does not protect against investments losing value (market drops are your risk, always), bad advice, being sold a terrible product, or a Ponzi scheme where the 'securities' never existed as you were told. Crypto held at a crypto platform is generally not SIPC-protected — FTX customers learned there's no SIPC in that world. And cash parked at a broker may be swept into program banks (FDIC territory) or a money market fund (neither FDIC nor a 'cash' claim) — worth knowing which.

Your checklist for sleeping well

1. Confirm your broker is a SIPC member (sipc.org has a lookup) and check its 'excess of SIPC' coverage — every major firm publishes this.
2. Use FINRA BrokerCheck to vet any smaller or unfamiliar firm before wiring money to it.
3. Keep copies of statements — in a messy failure, your records speed up your claim.
4. With very large accounts, remember capacities: individual, joint, and IRA each carry separate SIPC coverage, and a second brokerage doubles everything.
5. Understand your cash sweep: bank sweep (FDIC), money market fund (investment), or free credit balance (SIPC cash, $250k cap).

The bottom line

Brokerage failures are scary headlines but historically gentle events for customers: segregation keeps your assets yours, transfers move them to a new firm, and SIPC's $500,000 per account capacity backstops the rare shortfall — with private excess coverage above that at major firms. What no acronym covers is market losses, nonexistent 'investments,' or crypto platforms. Use a real SIPC-member broker, know your capacities, and this is one risk you can mostly cross off the list.

1. 1
   Confirm SIPC membership

   Check the brokerage's footer and verify at sipc.org. Every mainstream US broker — Fidelity, Schwab, Vanguard, Robinhood — is a member; be suspicious of any platform that is not, especially crypto platforms that merely have a brokerage affiliate.

2. 2
   Understand your coverage math

   $500,000 per customer per capacity, including up to $250,000 for cash. Separate capacities (individual, joint, IRA, Roth) each get their own $500,000, so a couple with individual, joint, and two IRAs can have several million in coverage at one firm.

3. 3
   Check for excess-SIPC insurance

   Large brokers carry private insurance above SIPC limits — often hundreds of millions in aggregate. It has essentially never been needed, but it is listed on each broker's site if you want the detail.

4. 4
   Keep records independently

   Download statements quarterly and after large transactions. In the messy failures (MF Global, Lehman's brokerage arm), customers with their own records were made whole fastest.

5. 5
   Split eight figures across firms if it helps you sleep

   Above SIPC limits the practical protection is asset segregation, which has held in every modern failure — but using two custodians costs nothing and removes the single point of failure entirely.