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Securities Investor Protection Act of 1970

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Securities Investor Protection Act of 1970

SIPA is where failing brokerages go to die. Most likely, a failing brokerage will go through a proceeding under the Securities Investor Protection Act of 1970 rather than a Bankruptcy Code liquidation case.

Under SIPA, the Securities Investor Protection Corporation will try to arrange the transfer of the failed brokerage's accounts to a living, breathing securities firm. But if they can't find a taker, the SIPC liquidates the brokerage completely (in a huge melting pot). If that happens, the...

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