Understanding SIPC and FDIC coverage
July 30, 2009
Given the current market conditions and the messages consumers are hearing about the economy, we understand that you may have questions about federal programs such as the Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SIPC). This article provides some basic information on this coverage, and contains links to websites that provide more detailed information.
FDIC insurance and SIPC coverage protect customers against the risk of failing financial institutions. They do not protect consumers against market losses.
FDIC insurance
FDIC insurance covers deposits in FDIC-insured federal banking institutions, generally banks and savings associations. Up until October 3, 2008 coverage was limited to up to $100,000 per depositor for non-qualified accounts in the institution and $250,000 per depositor in qualified accounts in the institution. On October 3, 2008, the FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor in qualified or non-qualified accounts. This temporary increase lasts through December 31, 2013.
Example of single account holder: If you have $250,000 deposited in your name in an FDIC-insured bank, you are fully covered if the institution fails. If you have $300,000 deposited in that bank account, or if you have more than one account in your name at the same bank where the deposits add up to more than $250,000, you are covered up to $250,000. In other words, all accounts in the name of a single person at the same insured bank are added together, and the total amount insured is $250,000.
Your deposits may be insured above the $250,000 if you also own other accounts (e.g. joint accounts).
Example of joint accounts: A husband and wife can have up to $500,000 in one or more joint accounts at the same insured bank and the deposits would be fully insured. The husband's share of the account is insured up to $250,000 and the wife's share is insured up to $250,000. If the couple has more than $500,000 deposited in one or more joint accounts, they are covered only up to $250,000 per owner for these joint accounts.
The FDIC insures deposits based on account ownership status. So it is possible to have deposits in multiple accounts that add up to more than $250,000 at one institution and still be fully insured.
Example of multiple ownership type accounts: A husband has a single account with $250,000 in an FDIC-insured bank. His wife has a single account with $250,000 in the same bank. The couple also has a joint account, with $500,000 in the same bank. In this scenario, all of the deposits are covered: the husband and wife are both fully insured in their single accounts, and each of their $250,000 in the joint account is separately covered
Retirement accounts, sometimes called qualified accounts, are also covered by FDIC insurance. All retirement accounts such as IRAs, SIMPLEs, SEPs and Keogh accounts owned by the same person in the same FDIC-insured institution are added together and the total is insured up to $250,000.
Certain types of accounts, such as the Ameriprise® Insured Money Market Account (AIMMA) multi-bank sweep program, are able to provide depositors with higher FDIC coverage because assets are deposited in several different banks. Each bank is insured by the FDIC so we are able to provide clients with up to $2.5 million in FDIC-insured cash in your various single-owner accounts. Joint accounts can have up to $5 million in FDIC-insured cash and retirement account holders can have up to $2.5 million in FDIC-insured cash1.
SIPC coverage
SIPC coverage is provided to customers that hold cash and securities such as stocks, bonds and mutual funds at a brokerage firm. This provides protection to customers who maintain assets at eligible brokerage firms in the event the brokerage firm fails. SIPC does not cover losses due to a decline in value of securities or cash.
Generally SIPC covers up to $500,000 per individual per brokerage firm. So if you have $500,000 in assets at a brokerage firm, and the brokerage firm fails, SIPC coverage will insure up to $500,000 including up to a maximum of $100,000 in cash. SIPC coverage applies if the firm fails and the assets are lost or misappropriated by the firm.
SIPC coverage of $500,000 is extended to each "legal customer." For instance, if you have three accounts at a firm—and one is an individually held account in your name only, another is a joint account with your spouse, and a third is an IRA account in your name—each account is considered a separate "legal customer" and each will be eligible for full SIPC coverage.
American Enterprise Investment Services, Inc., an affiliated broker of Ameriprise Financial, has obtained supplemental SIPC insurance to cover claims in excess of the base SIPC levels of coverage. The excess coverage provides additional protection to customers. This coverage provides an additional $24.5 million in securities coverage per client, with a policy maximum of $100 million.
Neither FDIC nor SIPC coverage is provided for customers who have:
- Mutual funds held directly with the mutual fund company (not in a brokerage account)
- Annuity and insurance contracts held with the insurer
- Any assets held with non-FDIC or non-SIPC member institutions
Individual assets may be covered under either SIPC or FDIC, but not both.
Please refer to our publication, How We Safeguard Your Dreams for more information on the ways Ameriprise Financial helps protect clients. You may also refer to the SIPC and FDIC websites for more detailed information on their coverage.
Ameriprise Financial continues to operate from a position of strength despite the market's extremely volatile and challenging conditions. Our company's risk exposure continues to be managed carefully, our liquidity and capital positions remain strong, and our levels of debt remain reasonable and manageable.
We are updating the information on ameriprise.com frequently to help you better understand The Reserve funds situation and the rapid developments in the financial markets. Please check back frequently for helpful updates and commentary. If you have specific concerns, please contact your financial advisor.
1 This assumes the client does not have additional accounts at the same banks used by AIMMA. Clients are responsible for monitoring the total amount of cash they may have at any particular bank. If a client has an existing deposit relationship with an AIMMA participant bank, they may "opt out" of having their AIMMA funds deposited at that bank.
The Ameriprise® Insured Money Market Account is an FDIC-insured product offered through Ameriprise Financial Services, Inc. and held in an omnibus account at one or more FDIC-member banks (collectively, the "Program Banks"). The Program Banks may serve individually as custodians for all or a portion of the assets held within your AIMMA, as described in the AIMMA Terms and Conditions. Deposit products are FDIC-insured up to $100,000 per depositor ($250,000 per depositor for qualified FDIC retirement accounts) at each Program Bank and up to $1 million per depositor across all Program Banks combined. Deposit products are not covered by the Securities Investor Protection Corporation (SIPC).
Brokerage, investment, and financial advisory services made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. All securities transactions are cleared by American Enterprise Investment Services, Inc., a wholly owned subsidiary of Ameriprise Financial, Inc. American Enterprise Investment Services, Inc. is a member of the FINRA and SIPC.
An investment in a money market fund (the fund) is not guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
You should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus, which contains this and other important information, call (800) 297-7378. Read the prospectus carefully before you invest.
Investment products are not insured by the FDIC, and are not deposits or obligations of or guaranteed by a financial institution; and involve investment risks, including possible loss of principal, and thus, may fluctuate in value.
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