Legal Definitions - Securities Investor Protection Act

The Securities Investor Protection Act (SIPA) is a federal law that was passed in 1970. It created the Securities Investor Protection Corporation (SIPC), which is not a government agency, but is designed to protect investors in case their brokers or dealers go bankrupt or are in financial trouble.

For example, if you have invested money with a broker and that broker goes bankrupt, you may lose your money. However, if the broker is a member of SIPC, you may be able to recover some or all of your money through the SIPC fund.

The purpose of the Securities Investor Protection Act is to provide some protection for investors in case of financial fraud or other problems in the securities industry. It is important for investors to understand their rights and protections under this law.