Securities Investor Protection Corporation

The Securities Investor Protection Corporation (SIPC /ˈsɪpᵻk/) is a federally mandated, non-profit, member-funded, United States corporation created under the Securities Investor Protection Act (SIPA) of 1970 and mandates membership of most US-registered broker-dealers. It is not a Self-regulatory organization (SRO). "The SIPC fund, which constitutes an insurance program, is designed to protect the customers of brokers or dealers subject to the SIPA from loss in case of financial failure of the member. The fund is supported by assessments upon its members. If the fund should become inadequate, the SIPA authorizes borrowing against the U.S. Treasury. An analogy could be made to the role of the Federal Deposit Insurance Corporation (FDIC) in the banking industry."

SIPC is required to report to, and be overseen by, the Securities and Exchange Commission. "Pursuant to SIPA, the Commission also has delegated authority to conduct inspections of SIPC, review SIPC annual reports, and approve SIPC’s bylaws, rules, and any amendments to the bylaws and rules." As the SIPC states on its website, "Though created by the Securities Investor Protection Act (15 U.S.C. § 78aaa et seq., as amended), SIPC is neither a government agency nor a regulatory authority. It is a nonprofit, membership corporation, funded by its member securities broker-dealers."

In response to the near collapse of the financial markets in 1970, Congress chose to enact legislation that could prevent an escalation of brokerage firm insolvencies and help stabilize the financial markets. In December 1970, Senator Muskie resumed discussion of S.2348, which proposed creation of the Federal Broker Dealer Insurance Corporation (which became the Securities Investor Protection Corporation), a compromise with the House version H.R.19333 followed, and the bill passed. President Richard Nixon signed the bill into law on December 30, 1970. Excerpts from the President's statement made clear the goals of the legislation:

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