What is the primary purpose of the Securities Investor Protection Corporation (SIPC)?

The primary purpose of the Securities Investor Protection Corporation (SIPC) is to protect investors against losses resulting from the bankruptcy of a broker-dealer. SIPC provides a safety net for customers of member brokerage firms, ensuring that they can recover their cash and securities up to a certain limit if their broker fails financially. This protection is especially important in the case where a broker-dealer becomes insolvent, as it helps maintain investor confidence in the stability of the financial markets and the integrity of brokerage firms.

SIPC does not provide insurance against investment losses from a decline in value of securities or guarantee the performance of investments. Its focus is strictly on safeguarding customer assets in the event of broker-dealer failure rather than ongoing market risks or regulatory oversight. Additionally, it does not have the role of regulating illegal trading activities or overseeing mergers and acquisitions, which are functions handled by other regulatory bodies in the financial sector.