What is the purpose of the Securities Investor Protection Corporation (SIPC)?

The Securities Investor Protection Corporation (SIPC) plays a crucial role in the financial system by providing a safety net for customers of brokerage firms. Its primary purpose is to protect investors in the event that a brokerage firm becomes insolvent or fails. SIPC steps in to help recover and return the securities and cash that belong to customers, up to a limit of $500,000 per customer, which includes a maximum of $250,000 for cash claims. This protection helps to instill confidence in the financial markets by ensuring that investors are safeguarded against potential losses due to a brokerage firm's failure.

The other options address functions that are outside the scope of SIPC's mission. Insuring bank deposits is the role of the Federal Deposit Insurance Corporation (FDIC), while regulating stock exchanges is managed by the Securities and Exchange Commission (SEC). Providing personal loans does not fall under the functions of SIPC, which exclusively focuses on investment accounts and transactions related to broker-dealers. Thus, protecting customers if a brokerage firm fails is indeed the specific responsibility of SIPC.