SIE Exam Question 228: Answer and Explanation

Question: 228

SIPC, the securities investor protection corporation is:

• A. An insurance entity that protects investors who are sold worthless securities
• B. A Congressional guarantee against losses in the securities markets
• C. An insurance entity that protects investors investments again market losses up to $500,000
• D. None of the above

Correct Answer: D

Explanation:

D: SIPC was set up to protect customer ACCOUNTS in the event of a broker-dealer bankruptcy, not protect investments against loss. Be careful of the wording in this question. Cash & securities in customer accounts are 'insured' up to $500,000 in the event the B/D goes bankrupt and the cash and securities can't be located and properly returned to the customer.