What the FDIC, SIPC and FINRA Mean For Your Investments

Daniel Penzing
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FDIC – Federal Deposit Insurance Corporation

It is hard to believe that the FDIC only came into being in the late 1930s, created by FDR as a way to stop bank runs. Banks in the early 20th century were popular targets for mugs and robbers who believed that people put their money in savings accounts to be left alone. The idea was that the federal government would set up a federal guaranty program and make insurance that allows you to deposit your money without worry in case the bank went belly up. It turned out to be an effective investment, as bank runs largely declined as a result.

FDIC Coverage

FDIC insurance is based on the amount you have in your account. Today, it is about 4,000 per person, per insured account. However, many banks automatically offer a higher coverage today, sometimes in the millions, and all the insured money you deposit is covered, up to that amount. The FDIC covers the first 100,000 and the account must be directly held under the customer’s name. If you have more than 100,000 that is in one account, it is up to the bank where you have the various accounts to insure them. It is also insured whether you have the money in a checking account, a checking and savings account, or a certified investment account.

SIPC – Securities Investor Protection Corporation

The SIPC is a nonprofit and independent organization established after the stock market crash of 1929. Its goal is to protect investments if a brokerage firm collapses. Unlike other banking protections such as the FDIC, your investments are not covered by this organization.

Federal Deposit Insurance Corporation, or FDIC.

Created as a result of the 1933 Banking Act, the FDIC has two main purposes: protecting individuals’ bank deposits and maintaining confidence in the United States banking system.

Financial Industry Regulatory Authority, or FINRA.

FINRA is an independent securities industry regulator. It was founded in 2007 by the merger of NASD and NYSE regulations. Its main goal is to protect investors from fraud. At the same time, it regulates the actions of broker-dealers.

All three organizations have similar goals – protecting investors and maintaining investor confidence.

FINRA – Financial Industry Regulatory Authority

The Financial Industry Regulatory Authority (FIA) is a corporation established in April, 2007. It is an independent corporation funded by the securities industry. Before it was created, the National Association of Securities Dealers (NASD) regulated the industry. It was renamed as the Financial Industry Regulatory Authority. In addition to this, the Central Registration Depository (CRD) was renamed as National Securities Clearing Corporation (NSCC). There is a clear similarity between the clearing corporations and the FIA. The CRD is a no cost subsidiary of the Security Industry and Financial Markets Association (SIFMA). The FIA is a non-profit corporation with no cost affiliates. It has three main goals: