SIPC protection $500k per account

Q

Quanto

SIPC says about itself:
Mission
SIPC was created under the Securities Investor Protection Act as a non-profit membership corporation. SIPC oversees the liquidation of member firms that close when the firm is bankrupt or in financial trouble, and customer assets are missing. In a liquidation under the Securities Investor Protection Act, SIPC and the court-appointed Trustee work to return customers’ securities and cash as quickly as possible. Within limits, SIPC expedites the return of missing customer property by protecting each customer up to $500,000 for securities and cash (including a $250,000 limit for cash only).
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What happens when account has a long term investment consisting of a CoveredCall (ie. a LongStock + a ShortCallOption), where the initial value of the LongStock was say $440k, the credit received from the ShortCall say $40k, plus the account has also some cash of say $60k. Is this account with the said investment, really fully protected/insured by the SIPC?
 
No dig to you. I've been in sales since 2011. No one with an account exceeding $1mm has ever asked me about SIPC but I'm asked for accounts under $50K all the time. $250K of your cash and $250K of securities is the SIPC insurance. Most broker carry excess SIPC for the firm.

Quanto said:
You say in the past. What happens nowadays and in future?
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Robert Morse said:
No dig to you. I've been in sales since 2011. No one with an account exceeding $1mm has ever asked me about SIPC but I'm asked for accounts under $50K all the time. $250K of your cash and $250K of securities is the SIPC insurance. Most broker carry excess SIPC for the firm.
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So, in this case in practice & reality only $250k + $60k = $310k is protected, not $500k, right?
B/c I hardly can imagine a broker to overtake the rest when it goes bust... :)
 
Robert Morse said:
"FTX Trading Ltd., commonly known as FTX, is a bankrupt company that formerly operated a fraud-ridden cryptocurrency exchange and crypto hedge fund." That was NOT a US Broker Dealer, not a Security and not protected by SIPC.
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You didn't answer my question: If a US registered brokerage commits fraud and misused client's money. How are clients' positions transferred since they are non-existent?
 
I'm not going to do the math for you. If your account has your CASH, that max out at $250K. Securities in a SIPC event get moved first, which is why larger account like to own T-bills and not cash. I'm not aware of any time since SIPC was created that any "Customer" account was not just moved to another broker as is. That can occur over a weekend or take a little longer to get access to trading. When I had my own BD, I was not protected because I was not a customer. I was at GSEC, not BS. But as far as I know all the accounts covered by SIPC and not covered were just moved to another broker from BS. I would be more concerned about futures accounts which have no insurance and rely on the segregated account structure.

Quanto said:
So, in this case in practice & reality only $250k + $60k = $310k is protected, not $500k, right?
B/c I hardly can imagine a broker to overtake the rest when it goes bust... :)
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Robert Morse said:
No dig to you. I've been in sales since 2011. No one with an account exceeding $1mm has ever asked me about SIPC but I'm asked for accounts under $50K all the time. $250K of your cash and $250K of securities is the SIPC insurance. Most broker carry excess SIPC for the firm.
More...
No dig to you, we don't ask you because we have size, we use mega-brokerages who are "too big to fail". :D
 
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