Securities you own, including mutual funds, that are held by a broker for you, or for your account at a bank's brokerage subsidiary, are protected against physical loss by the Securities Investor Protection Corporation (SIPC), a non-government entity funded by assessments paid by members. SIPC protects customer accounts up to $500,000, including up to $100,000 in cash, if a member brokerage or bank brokerage subsidiary fails.

A very important distinction between SIPC (and any other type of protection for investments) and FDIC insurance on deposit accounts is: NO type of protection for investments insures against loss in the value of an account (the value of your investments can go up - or DOWN - depending on the demand for them in the market), while federal deposit insurance protects the amount in your deposit account(s) up to the $100,000 limit.

Treasury Securities

Treasury securities include Treasury bills (T-bills), notes and bonds. T-bills are more commonly purchased through a financial institution.

Customers who purchase T-bills at banks that later fail become concerned because they think their actual Treasury securities were kept at the failed bank. In fact, in most cases banks purchase T-bills via book entry, meaning that there is an accounting entry maintained electronically on the records of the Treasury Department; no engraved certificates are issued. Treasury securities belong to the customer; the bank is merely acting as custodian.

Customers who hold Treasury securities purchased through a bank that later fails can request a document from the acquiring bank (or from the FDIC if there is no acquirer) showing proof of ownership and redeem the security at the nearest Federal Reserve Bank. Or, customers can wait for the security to reach its maturity date and receive a check from the acquiring institution, which may automatically become the new custodian of the failed bank's T-bill customer list (or from the FDIC acting as receiver for the failed bank when there is no acquirer).