July 30, 2003
The Securities Investor Protection Act of 1970 created the Securities Investor Protection Corporation to provide customer protections against certain losses resulting from the failure of securities firms. SIPC's maximum protection limit per customer is $500,000, of which no more that $100,000 may be a claim for cash. Consequently, it is not uncommon for members or member organizations to provide, through an outside insurance company, excess SIPC coverage.
It has come to the attention of the NASD that some insurance companies may soon discontinue their supplemental SIPC insurance policies. Consequently, some members and member organizations that currently offer such protection may no longer do so in the near future.
The availability of excess SIPC coverage may have served as an inducement or a determining factor for customers in deciding to open or maintain a securities account. Therefore, members and member organizations that offer additional or excess SIPC coverage should provide customers 30 days notice prior to the discontinuation or reduction of any such coverage.