Investor Protection Schemes and What They Cover
6 steps · one page
In short
The protection that exists is narrower than almost everybody assumes, and the gap between the assumption and the reality is the single most useful thing in this article.
Scope, and one rule governs this article above all others. Coverage figures are reported as what a statutory or industry scheme provides. They are not reassurance, and this portal does not describe any account, firm or arrangement as protected, covered or safe. Whether a given scheme would leave a given person whole depends on facts about that person's holdings that no article can know. MarketClue is not a broker and holds no assets, so no scheme described here applies to anything MarketClue does. United States primary with two non-US comparators, verified 16 August 2026.
What the United States scheme is and does
The Securities Investor Protection Corporation covers cash and securities held at a member brokerage firm when the firm fails and customer assets are missing.
| Feature | Position |
|---|---|
| Overall limit | $500,000 per customer |
| Cash sub-limit within that | $250,000 |
| Applies per | Separate capacity — an individual account, a joint account and a retirement account are distinct |
| Residence requirement | None — non-US customers of a member firm are treated identically |
| Nature of the body | A non-profit corporation created by Congress — not a government agency and without a government backstop |
Mechanically, when a member firm becomes insolvent a court appoints a trustee to supervise the liquidation and process claims. Customer accounts are frequently transferred to another firm. Where assets are missing, the trustee distributes what is recoverable, the scheme advances funds up to the limits, and any remaining shortfall becomes an ordinary unsecured claim against the failed firm's estate. Claim deadlines are short and strictly applied.
What it does not cover, which is the part that matters
It does not cover investment losses. A security that falls in value has not gone missing, and no scheme in any jurisdiction compensates for that. This is the misconception the entire article exists to correct.
It does not cover bad advice, unsuitable recommendations or poor performance.
It does not cover investment contracts not registered with the regulator, nor — generally — commodities, futures or currency contracts.
The comparison people make, and why it is wrong in a way that matters. Deposit insurance and investor protection are routinely spoken of as though they were the same kind of thing. They are not. Deposit insurance covers the money itself — if the bank fails, the deposit is made good, and a deposit does not fluctuate. Investor protection covers the return of assets that should have been there. If the securities are present, the scheme has nothing to do, however much they have fallen. And the institutional difference is real: deposit insurance in the United States carries an explicit government guarantee, while the investor protection body is a non-profit corporation without one. A reader who treats a coverage figure as a floor under their portfolio's value has misunderstood the product entirely — and that misunderstanding is common enough that firms' own marketing sometimes does nothing to dispel it.
Excess coverage, and what it is worth knowing about
Many larger firms buy supplemental private insurance, generally called excess-of-scheme coverage, extending protection beyond the statutory limits.
Three facts about it, all of which are the reason this portal reports its existence rather than its adequacy. It comes from private insurers rather than from any statutory body. Its terms, aggregate limits and per-customer sub-limits vary by firm and are set out in the firm's own disclosures. And it covers the same thing the underlying scheme covers — missing assets, not market losses. Extending a limit does not widen the category.
Two comparators
United Kingdom. The compensation scheme covers £85,000 per person per firm for investments, applying where the firm fails rather than where the investment does. Holdings with separate unconnected firms are covered separately.
European Union. Member states operate investor compensation schemes under a common directive (Directive 97/9/EC), with a minimum of €20,000 and limits set nationally, generally well below the United States figure. The specific limit depends on the member state and should be checked against the national scheme.
What all three share is the boundary rather than the number. Every one of them protects against the failure of the firm and none protects against the failure of the investment.
Worked example
What a reader can establish for themselves. Whether a firm is a member of the relevant scheme is a matter of public record, as is the identity of the clearing firm actually holding the assets where an introducing arrangement is in place — which matters, because the entity whose failure the scheme would respond to is the one holding the assets, not necessarily the one whose name is on the app. That connection back to the first article in this pillar is the practical payoff of understanding the structure. This portal points at where the records are and interprets no firm's entry.
Frequently asked
8 questions
What does the US investor protection scheme cover?
Cash and securities at a member brokerage that fails with customer assets missing — up to $500,000 per customer, including a $250,000 sub-limit for cash, applied per separate capacity so that individual, joint and retirement accounts are distinct.
Is it government insurance?
No. It is a non-profit corporation created by Congress, without a government backstop — unlike deposit insurance, which carries an explicit government guarantee.
Does it cover losses on my investments?
No, and this is the central misconception. A security that falls in value has not gone missing. No scheme in any jurisdiction compensates for market losses, bad advice or poor performance.
Why is comparing it to deposit insurance misleading?
Because deposit insurance covers the money itself and a deposit does not fluctuate, while investor protection covers the return of assets that should have been there. If the securities are present, the scheme has nothing to do however much they have fallen.
What happens when a member firm fails?
A court appoints a trustee to supervise liquidation and process claims; accounts are frequently transferred to another firm; the trustee distributes what is recoverable and the scheme advances funds up to the limits. Any remaining shortfall becomes an ordinary unsecured claim against the estate, and claim deadlines are short and strictly applied.
What is excess-of-scheme coverage?
Supplemental private insurance many larger firms buy beyond the statutory limits. It comes from private insurers, its terms and limits vary by firm, and it covers the same category — missing assets, not market losses. Extending a limit does not widen the category.
How do other jurisdictions compare?
The United Kingdom scheme covers £85,000 per person per firm for investments. European Union member states operate schemes under a common directive with a €20,000 minimum and limits set nationally, generally well below the US figure. What they share is the boundary rather than the number.
Which firm's failure would the scheme respond to?
The one holding the assets, which under an introducing arrangement is not necessarily the one whose name is on the app. Scheme membership and clearing arrangements are matters of public record.
References
- SIPC — What SIPC Protects —
- Investor.gov (SEC) — Securities Investor Protection Corporation —
- FSCS — Investments (the £85,000 limit) —
- Directive 97/9/EC on investor-compensation schemes — EUR-Lex —
Educational and informational only — not investment advice, a recommendation, or an offer to buy or sell any security. Investing involves risk, including the possible loss of principal. Worked examples use fictional companies and figures.