Governor Rell, Banking Commissioner 
Assure Investors of Securities Safeguards
Securities Investor Protection Corporation Provides
Safety Net for Many Portfolios

October 7, 2008

Governor M. Jodi Rell and state Banking Commissioner Howard F. Pitkin are reminding Connecticut residents that there are a number of protections in place to safeguard their investments with brokerage firms.

“All eyes are on Wall Street this week, and unfortunately, it has not been a pretty picture,” Governor Rell said. “Connecticut residents are understandably worried about their market investments and the viability of some of securities firms that handle their accounts. We can assure them that there are several state and federal laws that can shield them from these firms’ trading losses.”

Commissioner Pitkin said that Connecticut residents have been inquiring about insurance coverage relating to securities brokerage accounts.

“While the FDIC has temporarily increased its insured deposits from $100,000 to $250,000 through 2009 per depositor per institution, investors buying securities can expect market risk and the bumps and rewards that accompany it,” Commissioner Pitkin said.

 Under state and federal law, securities brokerage firms must:

• Maintain adequate net capital to allow investors to receive back their cash and securities if the firm fails; 
• File financial reports with regulators;
• Segregate customer funds and securities from the firm’s own holdings to protect customers from the firm’s trading losses. 

If a brokerage firm registered with the Securities and Exchange Commission, it must be a member of the Securities Investor Protection Corporation (SIPC), a nonprofit corporation funded in part by its member firms.  Formed in 1970 by Congress, SIPC is not a government agency.  If your brokerage firm should fail, only then will SIPC enter the picture to cover any unsatisfied claims up to a specific limit for each account. 

Cash and securities held by your brokerage firm may be protected up to $500,000, including a $100,000 limit for cash.  Most securities brokerage firms also carry private insurance policies providing additional protection beyond SIPC limits.  For details on this “Excess SIPC” coverage, contact your brokerage firm directly.

Commissioner Pitkin explained that SIPC covers most types of securities such as stocks, bonds and mutual funds.  Particular questions concerning the scope of SIPC coverage relating to your securities holdings should be directed to your brokerage firm or to SIPC. 

“Although SIPC plays an important role in investor protection, it will not reimburse you for your losses if the market takes a tumble or compensate you if you were sold worthless securities,” Commissioner Pitkin said.

SIPC members must display an official sign showing their membership.  Make sure that both your firm and its clearing firm are SIPC members.  You can also check a firm’s SIPC status online at www.sipc.org or by calling the SIPC Membership Department at (202) 371-8300.