The industry needs to insure brokers or anyone accepting deposits from investors. Fact is that FDIC and SIPC have maximums that your account is insured in case of bankruptcy of broker or broker embezzlement of client funds. if you account is more than 10 million you would need to deposit and open account in more than 20 brokers. That is the case for insurance of all hedge funds and prop trading companies. Most investors would pay .5% each year just to have that insurance that their money won't be lost if broker goes bankrupt or broker steals their money. Which bank was receiving or holding madoff's clents money? SIPC protection limit maximum cash limit is only $100,000 from the sipc. Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered. After this first step, the firmâs remaining customer assets are then divided on a pro rata basis with funds shared in proportion to the size of claims. If sufficient funds are not available in the firmâs customer accounts to satisfy claims within these limits, the reserve funds of SIPC are used to supplement the distribution, up to a ceiling of $500,000 per customer, including a maximum of $100,000 for cash claims. Additional funds may be available to satisfy the remainder of customer claims after the cost of liquidating the brokerage firm is taken into account.