Make sure your broker has you covered by SIPC
— -- Q: How do I find out if my online brokerage firm is financially sound?
A: These days, investors seem more interested in getting their money back than making a killing. Part of that's a pretty healthy side-effect of a nasty bear market.
The reminder of the risks of investing is a good lesson.
But there's one risk you should never take when investing: That your broker will take off with your money. It's one thing to buy a stock and see its value fall. That's part of investing. But you should never subject yourself to the risk of your broker or financial adviser stealing your money.
Luckily, when you're dealing with an online brokerage firm, as you are, it's pretty simple to find out if you're protected. All reputable brokerage firms pay into a protection system called the Securities Investor Protection Corporation, or SIPC.
You should always check to see if your broker is a member of SIPC, just as you make sure your bank is a member of FDIC.
Most brokerage firms that belong to SIPC will display the SIPC logo on their websites somewhere. But since we're talking about your money, you should take the extra step to check for yourself. It's easyw these steps:
1. Log onto SIPC.com.
2. Click the "Who We Are" link on the left-side of the green bar at the top.
3. Click the "Member Database" link in red on the right-side of the page.
4. Enter the name of the brokerage firm in the blank and click the Search button.
5. Verify that the brokerage firm's name appears and that the address matches.
If your brokerage firm doesn't show up, don't panic. Some brokerage firms have a parent company with a different name that might be listed with SIPC. Check your account statement to see if there's a holding company and run that company's name through the website. If that doesn't show up either, click on the Contact Us link at the top of the page and inquire directly.
If your broker isn't covered, it might be time to think about moving your money to a firm that has SIPC protection.
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