What Happens If The Platform You're Using Files For Bankruptcy?

Another financial services firm buys its assets, transfers all its accounts with minimal interruption. The government provides insurance called SIPC coverage.

By Andia Rispah Igobwa

Edited by Lorinda Browne

Published May 5, 2021

Suppose a brokerage or platform files for bankruptcy, another financial services firm agrees to buy its assets. Its accounts will be transferred to the new custodian with minimal interruption.
Also, the government provides insurance called SIPC coverage. SIPC coverage protects customers who hold cash and securities such as mutual funds, bonds, or stocks in an account at SIPC-member brokerage firms if the brokerage firm files for bankruptcy or becomes insolvent. However, SIPC does not cover losses from a decline in securities’ value.
SIPC coverage limit is up to $500,000 per customer for all accounts at the same institution, including a maximum of $250,000 for cash.
Just a caution: Invest with major and regulated brokerage firms.