trading account & IRA account with same broker. Twice the SIPC Protection?

Discussion in 'Retail Brokers' started by jackpearson, Mar 20, 2012.

  1. If you have a trading account with $250k cash in it & an IRA account with the same broker as the trading account with $250k cash in it, are you fully SIPC insured at that broker for both the trading account & the IRA account? OR, are you just SIPC insured for $250k of the total $500k you have at that broker?
  2. rmorse

    rmorse Sponsor

    I believe SIPC goes by tax ID. So your IRA and your personal account have the same SS#, that would be one claim. If you do your person trading through an LLC with an EIN #, that would be a second claim with SIPC.
  3. newwurldmn


    I thought there is no issue with IRA's as they are cash accounts and thus securities are held in your name not the firms.

    Is that right Bob?
  4. How about both the trading account & an IRA account, $250k cash in each, with the same retail broker? Will both be SIPC insured?
  5. rmorse

    rmorse Sponsor

    SIPC covers cash and securities lost or stolen. Futures accounts are segregated accounts, but someone at MF Global still took the assets. So, you still need SIPC to protect cash accounts.
  6. rmorse

    rmorse Sponsor

    I'm not claiming to be an expert on this, but I have called SIPC in the past. At one broker, each "person" is allowed one claim. If you have multiple accounts, it would be included in one claim. Your max protection under SIPC is the SIPC limits on your combined accounts. SIPC only covers the loss, you can't assume the loss is total, so you might be fine anyway. But, you won't get paid for both over the SIPC limits if the loss needs to be replaced.

    Again, if you use an entity for your personal trading, it would be considered another "person", as long as you use the EIN#.
  7. Options12

    Options12 Guest

    This article says that an IRA would be covered separately, in full.

    The rules are very specific. For instance, if you have a taxable investment account and a separate retirement account with the same brokerage, you’re covered up to $1 million, or $500,000 per account per account holder. However, if you have two brokerage accounts, both worth $500,000, you’re only covered up to $500,000.
  8. rmorse

    rmorse Sponsor

    I assume that guy knows wat he's talking about, but I can't find that anywhere on the SIPC website. I read only this in many places:

    Terms of SIPC help. 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 firm's 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 firm's 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 $250,000 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.
  9. Options12

    Options12 Guest

    I did come across this statement from FINRA which supports the claim in the article. It sounds like an IRA might qualify as a separate "customer" and would be covered accordingly.

    SIPC coverage of $500,000 is extended to each "legal customer." For instance, if you have three accounts at a firm—and one is an individually held account in your name only, another is a joint account with your spouse, and a third is an IRA account in your name—each account is considered a separate "legal customer" and each will be eligible for full SIPC coverage.
  10. rmorse

    rmorse Sponsor

    Interesting that a joint account qualifies. Also, I have an IRA, Roth IRA and Profit sharing plan all at the same broker, I wonder if they are all considered different customers?

    Thank you for finding that.
    #10     Mar 20, 2012