We here at StateTrust Investments, Inc. know how important it is that you feel secure in the knowledge that your assets are safe. To that end, we are a registered member of the Securities Investor Protection Corporation (SIPC).
As a member of the Securities Investor Protection Corporation (SIPC) funds are available which protects our securities customers for up to US$500,000 (including US$250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org. Additionally, our clearing firm has an excess SIPC policy which provides additional account coverage up to $24.5 million (including up to $1,150,000 in cash) per client as defined by SIPC rules. With both SIPC and Lloyd’s of London coverage, accounts are protected up to a total of $25 million per client (as defined by SIPC rules) including up to $1,150,000 for cash balances, with an aggregate limit of $100 million.
This "Excess SIPC" protection is in addition to the protection provided by the Securities and Investors Protection Act, which is administered by SIPC and is subject to certain conditions and limitations, details of which are available upon request. Note SIPC and Excess SIPC provide coverage against loss of securities and cash, not against market depreciation, fluctuations in market value of your securities, or a trading loss.
Securities Investor Protection Corporation ("SIPC")
The SIPC was created by the United States Congress through the Securities Investor Protection Act in 1970 to protect investors against the loss of their investments in the event of a brokerage firm‘s collapse due to any of the following events:
- Bankruptcy.
- Financial difficulties.
- Fraud.
- Theft.
Since then, it has advanced over $500 million to help restore more than $13 billion to approximately 622,000 investors. The SIPC recovers investments for no less than 99 percent of investors that are eligible.
As long as the brokerage firm is a member of the SIPC, customers are protected by the SIPC. If the brokerage firm‘s registration with the United States Securities and Exchange Commission (SEC) ends, then SIPC membership is automatically terminated. If the brokerage firm‘s membership with the SIPC ends, the SIPC is powerless to protect customers after 180 days. The SEC typically steps in to stop a failed brokerage firm from letting SEC registration and SIPC membership lapse if customers are owed cash or securities.
If there was no SIPC in place, investors could suffer the full loss of securities or money, or see their hard-earned assets locked up in court for years.
So if your brokerage firm fails, the SIPC quickly moves to recover any stocks, cash, and securities (within specified limits—commodity futures contracts, fixed annuity contracts, currency, and investment contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933 are ineligible for SIPC protection) held for you by the brokerage firm.
What the SIPC Does
The SIPC will either proceed as the trustee or coordinate efforts with an independent, federal court-appointed trustee to recover your investments. If your brokerage firm fails, you get back any non-negotiable securities already registered in your name or in the process of being registered. Any other securities are then distributed on a pro rata basis among all of the brokerage firm‘s customers.
If the firm does not have enough money to cover initial claims, the SIPC‘s monetary reserve is used to fulfill the remaining claims of each customer up to a $500,000 limit. This figure includes a limit of $250,000 on cash claims. Any recovered money goes to pay investors with claims exceeding the SIPC‘s $500,000 limit. Your account may also be transferred to another brokerage firm. You will be given the option to let the new firm handle your account or to move to a new brokerage firm that you yourself select.
How do You Get Your Money Back
Once the SIPC or the federal court-appointed trustee begin their investigations, customers can expect to get their investments back within a 1-3 month period. If the brokerage firm‘s records are correct, cash and securities can be returned shortly after customers‘ completed claim forms are received or even earlier if customer accounts are transferred to another brokerage firm. Long delays (up to several months) usually occur when records are not accurate or if the principals of the failed firm were taking part in fraudulent activity.
SIPC Eligibility
Most customers are eligible for SIPC aid. The SIPC does not pay the claims of customers who are:
- General partners, officers, or directors of the firm.
- Beneficial owners of five percent or more of any class of equity security of the firm (other than certain nonconvertible preferred stocks).
- Limited partners with a participation of five percent or more in the net assets or net profits of the firm.
- Exercising a controlling influence over the management/policies of the firm.
- Brokers/dealers/banks acting on their own behalf and not for their customer or customers.
SIPC Questions & Answers
The following Table summarizes some of the most important questions regarding SIPC asset protection insurance:
| Question | Answer |
|---|---|
| What does the SIPC protect? | Investors‘ stocks, cash, and securities held by brokerage firms. |
| What is not protected by the SIPC? | Commodity futures contracts, fixed annuity contracts, currency, and investment contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933. Also, market depreciation, fluctuations in market value of your securities, or a trading loss are not protected. |
| What happens if I have an account in a brokerage firm with financial difficulties? | The SIPC will either proceed as the trustee or coordinate efforts with an independent federal court-appointed trustee to recover your investments. You get back any non-negotiable securities already registered in your name or in the process of being registered. Any other securities are then distributed on a pro rata basis among all of the brokerage firm‘s customers. If the firm does not have enough money to cover initial claims, the SIPC‘s monetary reserve is used to fulfill the remaining claims of each customer up to a $500,000 limit. This figure includes a limit of $250,000 on cash claims. |
| How do I get my investments back? | Once the SIPC or the federal court-appointed trustee begin their investigations, customers can expect to get their investments back within a 1-3 month period. If the brokerage firm‘s records are correct, cash and securities can be returned shortly after customers‘ completed claim forms are received or even earlier if customer accounts are transferred to another brokerage firm. |
SIPC Claim Process
Once the liquidation process begins, you will be notified and sent a claim form and instructions by the trustee. After you complete the claim forms, you must send them back to the trustee within the time period noted, or you may lose some or all of the amount that you are claiming. If your account has been transferred to another brokerage firm, you still need to file a claim so that you can clear up any mistakes that might occur with the transfer.
There are two deadlines for you to file claims:
- Court Deadline: Bankruptcy court typically sets a 60-day limit on filing a claim after the date the proceeding notice is published. Sometimes, however, the limit runs to 30 days. The deadline is noted in the published notice and a copy of it is sent to customers along with claim forms and instructions that also note the date.
- Federal Law Deadline: If you send the trustee your completed claim form after the date noted by bankruptcy court, but no later than six months after the proceeding notice was published then your claim will be delayed and your payment may be limited. Any claims that are sent in more than six months after the date the proceeding notice was published will not be processed at all. With some very limited exceptions, no extensions beyond the deadline will be allowed.
The SIPC and federal court-appointed trustees work off the notion that the records from your brokerage firm are correct. Quite often your account may be transferred to another firm before you even file a claim. Always keep copies of your transaction trade confirmations and monthly/quarterly statements. You may be asked to hand these over to the trustee.
Excess Account Protection Policy
The protection of our clients‘ assets held in custody remains one of our most important priorities. StateTrust is a member of the Securities Investor Protection Corporation ("SIPC"), which protects securities customers of its members up to US$500,000 (including US$250,000 for cash balances) per client. Explanatory brochure available upon request or at www.sipc.org.
In addition to SIPC protection, we provide additional coverage from Lloyd’s of London for up to USD$99.5 million. This provides the following combined protection for assets held in custody at StateTrust:
- A maximum per-client loss limit of USD$100 million.
- A maximum per-client loss limit of USD$1.15 million for cash balances with an aggregate loss limit of USD$100 million.
Please note that neither SIPC nor the additional Lloyd‘s of London insurance policy protects clients against loss due to market fluctuation of investments.
- StateTrust is a registered member of the Securities Investor Protection Corporation (SIPC)
- Securities in your StateTrust account are protected up to $500,000 (of which $250K can be for claims for cash awaiting reinvestment). See SIPC link for more information: www.sipc.org/
- SIPC does not protect against loss due to market fluctuation
- SIPC does not offer protection for the following types of investments: Antiques and collectibles; bank deposits, commodity futures contracts, fixed and variable annuity contracts, precious metals and investment contracts (such as limited partnerships).
