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I'm considering opening a brokerage account with a broker that is requesting $10,000 minimum funding. That money will not go to an FDIC covered bank account. But the broker does have an SIPC insurance. I understand that SIPC covers $250,000 of the cash sitting in a brokerage account. My question is: is that $250,000 coverage as strong and reliable as FDIC's $250,000 coverage?

I've read somewhere that SIPC only covers cash that took part in some stock transaction, and it does not cover "idle cash" that the account owner just wired in. Is it true?

Neil
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Ofer
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1 Answers1

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For cash, SIPC insurance is similar to FDIC insurance. Your losses are not covered, but you're covered in case of fraud.

Since your cash is supposed to be in a trust account and not commingled with brokerage's funds, in case of bankruptcy you would still have your cash unless there was fraud.

littleadv
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