In today's rapidly changing financial markets, you want to entrust your investments to a strong partner. RBC Capital Markets, LLC (RBC CM), provides the protection you need. We view the safety and security of the assets in your accounts as a priority equal in importance to the work we do helping you build, enjoy and share your wealth.
Key Distinction between Brokerages and Banks
It is important to understand a fundamental difference between how assets are treated in a bank account versus that of a brokerage account.
Banks are only required to have a fraction of all deposited money on hand to ensure they can meet minimum cash flow needs. Should a bank fail, and not have sufficient funds to fully reimburse its depositors, Federal Deposit Insurance Corporation (FDIC) protects depositors of member banks, up to certain limits.
In the brokerage industry, on the other hand, your assets are held in custody by the clearing firm servicing your account on behalf of your introducing brokerage firm, according to normal industry custom and practice. So your assets should always be available to you.
Thorough Measures to Protect Your Assets
The assets held in an account at RBC CM have four layers of protection:
First Layer of Protection: Fiscal Stewardship
RBC CM is known for careful, fiscally conscious decision making that benefits our clients and firm as a whole. We believe in taking a more conservative, diversified and longer-term approach to accomplishing our business goals. Plus, we are affiliated with a strong and dependable global leader in diversified financial services — Royal Bank of Canada.3
Second Layer of Protection: Compliance with SEC Requirements
Segregation of Assets
Segregation simply means your assets are kept separate from firm assets, and thus are protected from potential losses of the firm. To segregate your assets, RBC CM complies with SEC rules governing the separation of client assets from firm assets. By segregating your non-margin securities from firm securities — and keeping careful records of margin securities held "in street name" in your margin account — your assets would be readily identifiable in the unlikely event we would need to liquidate our firm.
RBC CM also fully complies with SEC rules requiring all broker-dealer firms to maintain sufficient net capital to ensure that you will get your cash and securities back, in the unlikely event that our firm should fail.
Third Layer of Protection: SIPC Insurance
Since RBC CM is a member of SIPC — a nonprofit corporation funded by member securities broker-dealers — you are eligible for SIPC insurance protection.
In the rare event that RBC CM would become insolvent and by some unlikely sequence there were securities missing from your account, SIPC reserve funds would be available to satisfy your claims against the firm, up to $500,000 per client, including up to $250,000 in cash.
All client accounts which are similarly titled are combined for purposes of determining SIPC protection. Accounts with separate legal titles, however, are protected separately. For example, your individual account, your joint tenants account with a spouse and your custodial account for a minor child would each receive separate protection.
Shares of money market funds, although often thought of by investors as cash, are, in fact, securities. If you hold such securities in your account, these shares are protected in the same manner as any other covered security and are not included in the $250,000 cash threshold.
As stated previously, SEC rules provide for property and possessions of a failed firm to be made available to protect you beyond SIPC's basic coverage. For more information about SIPC coverage, please see the SIPC website at www.sipc.org.
Fourth Layer of Protection: Excess SIPC Protection
Another way clients' assets are protected is through an insurance policy purchased by RBC CM from Lloyd's of London that provides coverage in excess of SIPC.
The policy provides additional securities and cash protection up to $99.5 million per SIPC qualified account (of which $900,000 may be cash). The firm's excess SIPC policy is subject to a maximum aggregate amount payable of $400 million.
There has never been a claim paid by an excess SIPC carrier. This is due in part to the segregation rules and the existence of SIPC coverage, which are the first lines of defense in the event of a brokerage firm failure. According to the SIPC website (www.sipc.org), "no fewer than 99 percent of eligible investors get their investments back from SIPC." Excess SIPC insurance is an additional layer of coverage in place for the statistically small chance that SIPC coverage would not be sufficient to settle claims.
Add it All Up: Layers and Layers of Protection
As outlined previously in this pamphlet, in the highly unlikely event you may need them, RBC CM provides four layers of protection for your assets. The table below illustrates the types of asset protection insurance available and the coverage you can expect to receive (layers three and four) — over and above the financial strength of our firm and the SEC capital and asset segregation requirements with which we comply (layers one and two).
Securities and cash
$500,000 (maximum $250,000 cash)
Excess SIPC Coverage2
$99,500,000 (maximum $900,000 cash)
$100,000,000 (maximum of $1,150,000 cash)
RBC Correspondent Services and/or RBC Advisor Services, divisions of RBC Capital Markets, LLC, member NYSE/FINRA/SIPC, provide custody services for accounts managed by your financial advisor. The referenced product or service is available through that relationship.
RBC Correspondent Services, is a division of RBC Capital Markets, LLC, member NYSE/FINRA/SIPC. RBC Capital Markets, LLC, is one of the nation's largest full-service securities firm's. RBC Capital Markets, LLC, is a wholly owned subsidiary of, and separate legal entity from, Royal Bank of Canada. Royal Bank of Canada does not guarantee any debts or obligations of RBC Capital Markets, LLC.
Securities offered through Buckman, Buckman & Reid, Inc. RBC Correspondent Services is not affiliated with Buckman, Buckman & Reid, Inc.