How does “Excess SIPC” protection work?
Over the years, securities firms have arranged three types of “excess SIPC” protection. The first, called “net equity,” covers each eligible customer account up to the account’s total value (or net equity). The second is called “aggregate limit” insurance. This is similar to “net equity” insurance, but there is a limit per customer account and an aggregate limit on the total amount payable for all accounts. For example, a firm with a $10 million customer account limit subject to a total aggregate of $100 million would pay no more than $10 million to any one customer account and no more than $100 million in all. Using the same example, amounts less than $10 million could be paid to settle multiple customer account claims, but in no event exceed $100 million. The third type provides an aggregate limit for any one customer, but does not impose a cap on the total amount that will be paid when a securities firm is liquidated.
