SIPC limits and IB

Discussion in 'Retail Brokers' started by raleigh1208, Feb 28, 2006.

  1. I've been with IB for close to a year and love it. So I'm not interested in changing brokers. My problem for which I need your advice is a good problem to have. My IB joint account with my spouse is now at the SIPC protection limit of $500,000 in securities. I read on IB's website about the additional $29.5 million of protection provided by IB to its customers through a Lloyd's of London policy, subject to a $150 million limit for all claims against the policy.

    While I certainly feel that IB will be around for many years, I've got the fear of a REFCO type implosion that would take down IB completely, which could create claims in excess of the $150 million limit. Again, I don't think it would happen, but I feel it is a risk, however slight, if my IB securities exceed the $500,000 SIPC coverage. To aleviate the risk I could set up another account, either with IB or another broker.

    From looking at IB's FAQ on protection, it looks like I could open a new IB individual account for my wife, or myself, in addition to our joint account with IB. I understand under those circumstances each account, the joint account and the individual account, would EACH have the SIPC $500,000 protection. Of course if I have 2 accounts, I'd have the $10 minimum monthly commission for each account.

    Can anyone comment on my fear, and the possible risks, of keeping everything in my current joint account with IB, even though it exceeds $500,000 in securities? Should I just rely on the additional $29.5 million through the Loyd's of London policy and quit tilting at windmills?

    If anyone has both an individual account and a joint account with IB, is it possible to make transfers of cash or securities between the accounts without fees? or would I have transfer cash from one account back to my bank checking account and then move it into the other account?

    Thanks in advance for all your help.
  2. you are wise to protect yourself when it is so easy to do. just open 2 or more accounts then use the ib fa account to combine them. ib only charges fees one time under the fa account. that is how i do it with my accounts that combined are over the spic limits.
    you cant make a free internal transfer unless both accounts have the same name so you would have to move it to your bank account first. ib gives you 1 free transfer per month per account.
  3. If a huge firm (not necessarily IB) went under, the odds are SIPC would go with it. So that insurance may not be worth the paper it's printed on.

    I'm not an accountant or lawyer (I'm too interesting :D) but I'd recommend keeping only what you need for investing in the account and getting all other money out. Just my 2 cents.

  4. lol there's no differencce between having 500k with goldman sachs or 500k with ib. both have the same ins. it's all a pain in the ass. i have 6 accounts for this very reason. iwon't put more than 200k in any one account. i jsut don't trust anyone and want to be protected. but yes you can have an ira,joint and individual account with ib and all protected. i mean ib is huge now and there's no question there as safe as they come. i bet ib is 5 times the size refco was
  5. def

    def Interactive Brokers

    I'll add one comment to this thread...

    keep in mind our margin policies, while not always popular, they are in place for just this very reason. it significantly reduces the risk to the firm and client base. as for the large prime brokers, you could argue that their exposure to hedge funds is huge and thus some of these banks are perhaps a greater risk than a broker with strict margin and credit controls.

    the most important thing for you to do is sleep well at night. wherever you place your money, do your research and do what makes you feel comfortable.
  6. that is - $29.5mill per client but $150mill for all clients? am I getting it right?
  7. Yup I think so. Basically if IB goes under you're screwed. Thus you may want to spread your money around.....but remember anyone else who goes under you're also screwed, and I think IB is less likely because they do instant margin calls -- they don't wait three days. Still, if the CEO disappears with $1 billion in customer funds that won't help :eek:

  8. GTC


    def, Does IB's insurance apply to each account in IB or to each client? If I place multiple accounts with IB, will IB's insurance apply up to the full insurance amount for all of my accounts individually, or combined with all of my accounts?
  9. JayS


  10. JayS


    With a reserve of slightly more than $1 billion, SIPC could not keep its doors open for long if its purpose was to compensate all victims in the event of loss due to investment fraud.
    #10     Mar 1, 2006