Account Protection Frequently Asked Questions

How does SIPC protection work?

How does excess SIPC work?

I am an investor with an account value at Ziegler that is higher than $500,000. What should I do?

If my assets are not an asset type that is protected by SIPC, do I have any excess SIPC account protection?

Is there anyone who is excluded from SIPC protection?

What does SIPC cover and how does it differ from Federal Deposit Insurance Corporation (FDIC) insurance?

If I have one account with one SIPC member and one account with another (separate) SIPC member, how are those accounts covered?

If I have more than one brokerage account with Ziegler, is each account protected through SIPC?

How long does it typically take to receive securities and cash from SIPC if the account protection is instituted?

Is it safer to hold my own certificates?

Can any securities firm be a member of SIPC?

Who examines the operational and financial conditions of SIPC members?

What is the FDIC?

What is the purpose of FDIC deposit insurance?

What is the FDIC insurance amount?

Whose deposits does the FDIC insure?

Does FDIC insurance protect creditors and shareholders?

What does FDIC insure?

What is not insured by the FDIC?

What types of financial institutions are insured by the FDIC?

Can insurance coverage be increased by depositing funds with different insured banks?

Can insurance coverage be increased by dividing my deposits into several different accounts at the same insured bank?

Can insurance coverage be increased by using a different co-owner's Social Security number on each account or changing the way the owners' names are listed on the accounts?

Can insurance coverage be increased by dividing my funds and depositing them into several different accounts?

What happens when banks merge?

What happens when a bank fails?

If a bank fails, what is the timeframe for payout of the funds that are insured if the bank cannot be acquired by another financial institution?

What happens to customers with uninsured deposits?

Q. How does SIPC protection work?

A. You can have confidence that given the very high percentage of client assets that are recovered during liquidation, SIPC protection is adequate for nearly all client accounts.

Consider the following:

Federal securities laws require that client assets be segregated from a firm’s own assets. The law is backed by internal and external audits, regulatory examinations and weekly and monthly reporting requirements.

Most client assets are held in book-entry form at industry depositories and are not in physical possession by the firms themselves.

SIPC funds are used to make investors whole after all client assets held at the securities firm have been recovered. SIPC provides $500,000 of net equity protection, including $100,000 for claims for cash awaiting reinvestment, but that does not necessarily mean that the account will receive only up to $500,000. Rather, in a SIPC proceeding, the account will receive a pro-rata share of all client assets recovered in liquidation and then will receive up to $500,000 from SIPC to make up any difference that may still exist. To illustrate a SIPC liquidation, assume that a securities firm fails, resulting in $5 billion of client claims on assets, with a recovery rate of assets in liquidation of 90% or $4.5 billion, and assume a client account value of $5 million:

• In a SIPC claim proceeding, the client would receive $4.5 million from recovered assets and $500,000 from SIPC
• The loss on a $5 million client account would be zero.

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Q. How does excess SIPC work?

A. After the SIPC limit ($500,000 of net equity protection, including $100,000 for claims for cash awaiting reinvestment) is exceeded, Excess SIPC covers the remaining net equity of securities positions and cash in your account.

Pershing'sexcess insurance policy purchased through Lloyd’s of London provides the following excess account protection for assets held in custody with Pershing and its London-based affiliate, Pershing Securities Limited:

• An aggregate loss limit of $1 billion for eligible securities — over all client accounts
• A per client loss of $1.9 million for cash awaiting reinvestment — within the aggregate loss limit of $1 billion

This excess account protection offers the highest level of coverage available in the industry today. Excess account protection claims would only arise where Pershing failed financially and eligible client assets or covered accounts, as defined by SIPC and Lloyd’s of London, cannot be located due to theft, misplacement, destruction, burglary, robbery, embezzlement, abstraction, failure to obtain or maintain possession or control of Ziegler clients’ securities or to maintain the special reserve bank account required by applicable rules (SEC 15c-3).

For more information about Lloyd’s of London, please visit their Web site at www.lloyds.com.

Q. I am an investor with an account value at Ziegler that is higher than $500,000. What should I do?

A. Knowing that your assets are held by our clearing firm, Pershing, be assured that your assets are safe and protected. Pershing, an affiliate of The Bank of New York Mellon Corporation, is a leading global provider of clearing and financial services outsourcing solutions to more than 1,100 institutional and retail financial organizations, registered investment advisors, and managed account programs.

Pershing'sexcess insurance policy purchased through Lloyd’s of London provides the following excess account protection for assets held in custody with Pershing and its London-based affiliate, Pershing Securities Limited:

• An aggregate loss limit of $1 billion for eligible securities — over all client accounts
• A per client loss of $1.9 million for cash awaiting reinvestment — within the aggregate loss limit of $1 billion

This excess account protection offers the highest level of coverage available in the industry today. Excess account protection claims would only arise where Pershing failed financially and eligible client assets or covered accounts, as defined by SIPC and Lloyd’s of London, cannot be located due to theft, misplacement, destruction, burglary, robbery, embezzlement, abstraction, failure to obtain or maintain possession or control of Ziegler clients’ securities or to maintain the special reserve bank account required by applicable rules (SEC 15c-3).

For more information about Lloyd’s of London, please visit their Web site at www.lloyds.com.

Q. If my assets are not an asset type that is protected by SIPC, do I have any excess SIPC account protection?

A. No, your assets must first be protected by SIPC in order to be eligible for excess SIPC protection.

Q. Is there anyone who is excluded from SIPC protection?

A. Most investors are eligible for SIPC assistance. However, SIPC’s funds may not be used to pay claims of any failed securities firm for investors who are:

• A general partner, officer, or director of the firm
• The beneficial owner of 5% or more of any class of equity security of the firm (other than certain nonconvertible preferred stocks)
• A limited partner with a participation of 5% or more in the net assets or net profits of the failed firm
• Someone with the power to exercise a controlling influence over the management or policies of the firm
• A broker or dealer or bank acting for itself rather than for its own clients

Q. What does SIPC cover and how does it differ from Federal Deposit Insurance Corporation (FDIC) insurance?

A. SIPC replaces missing stocks and other securities in cases in which it is possible to do so — even when the investments have increased in value. SIPC protects the cash and securities, such as stocks and bonds, held at a financially troubled securities firm. SIPC covers retail brokerage investors, as well as institutional investors.

SIPC does not cover individuals who are sold worthless stocks and other securities. Among the investments that are ineligible for SIPC protection are commodity futures contracts and precious metals, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the SEC under the Securities Act of 1933.

It is also important to understand that SIPC protection is not the same as FDIC protection. SIPC does not offer to investors the same blanket protection that the FDIC provides to bank depositors. The FDIC protects deposits, currentlyup to $250,000 in most, but not all, U.S. banks and savings associations in the event that the institution becomes insolvent. For further information about FDIC insurance, see www.fdic.org. The FDIC does not cover securities, mutual funds, or similar types of investments, and money that is invested in an FDIC-insured product is not covered by SIPC.

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Q. If I have one account with one SIPC member and one account with another (separate) SIPC member, how are those accounts covered?

A. The accounts are treated as separate accounts. The $500,000 in protection applies to each account.

Q. If I have more than one brokerage account with Ziegler, is each account protected through SIPC?

A. Yes, if you hold the accounts in separate, legal capacities. In other words, if you hold one account in your own capacity and maintain other accounts as a trustee for another person under certain trust arrangements, you would be deemed a different client in each capacity.

Any client who has several different accounts must be acting in a good-faith separate capacity with respect to each account. For instance, an investor might have one account in his or her name and maintain a joint account with his or her spouse. All such accounts, however, must meet the requirements of SIPC rules identifying accounts of “separate” clients of your financial organization. Copies of these rules may be obtained at www.sipc.org or by writing to SIPC and requesting the “Series 100 Rules.” As another example, an investor who in a single capacity has several different accounts with his or her financial organization, such as cash and margin accounts, would be considered a single client for the purposes of applying the SIPC account protection limits.

Q. How long does it typically take to receive securities and cash from SIPC if the account protection is instituted?

A. Most clients can expect to receive their property in one to three months. If the firm’s records are inaccurate, or if the firm was involved in fraudulent activity, it may take longer.

Q. Is it safer to hold my own certificates?

A. No, certificates you hold can be misplaced, stolen, or accidentally destroyed. In addition, when you hold your own securities, you are responsible for collecting interest and dividend payments and monitoring events, such as bond calls and tender offers. Missing such events can cost you money.

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Q. Can any securities firm be a member of SIPC?

A. All SIPC members must be registered with the SEC. If a member loses its SEC registration, its SIPC membership is automatically terminated.

Members of FINRA, (the Financial Industry Regulatory Authority) are required to obtain SIPC coverage. Ziegler is a member of both FINRA and SIPC.

Q. Who examines the operational and financial conditions of SIPC members?

A. The SEC, Financial Industry Regulatory Authority (FINRA), and state regulators are the “examining authorities” for SIPC members. SIPC itself has no authority to examine or inspect member firms.

Q. What is the FDIC?

A. The FDIC — short for the Federal Deposit Insurance Corporation - is an independent agency of the United States government. The FDIC was created by Congress in 1933 to make the savings of millions of Americans secure. The FDIC protects depositors against the loss of their insured deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government.

Q. What is the Purpose of FDIC deposit insurance?

A. The FDIC protects depositors' funds in the unlikely event of the financial failure of their bank or savings institution. FDIC deposit insurance covers the balance of each depositor's account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank's closing.

Q. What is the FDIC insurance amount?

A. On October 3, 2008, Congress temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor. This includes principal and accrued interest up to a total of $250,000. For example: Jane Smith has a CD in her name alone with an original balance of $248,000. Jane has interest earned of $ 3,000. Jane's account now totals $251,000. But, Jane is only insured up to $250,000 and $1,000 is uninsured.

Q. Whose deposits does the FDIC insure?

A. Any person or entity can have FDIC insurance on a deposit. A depositor does not have to be a citizen, or even a resident of the United States.

Q. Does FDIC insurance protect creditors and shareholders?

A. FDIC insurance only protects depositors, although some depositors may also be creditors or shareholders of an insured bank.

Q. What does FDIC insure?

A. FDIC insures all types of deposits received by a financial institution in its usual course of business. For example, savings and checking accounts, NOW accounts, Christmas club accounts, and time deposits (including certificates of deposit, "CDs") are all subject to FDIC insurance coverage. Cashiers' checks, officers' checks, expense checks, loan disbursement checks, interest checks, outstanding drafts, negotiable instruments and money orders drawn on the institution are also considered deposits, and so are also protected by FDIC. Collectively, these types of instruments are referred to as "official checks." For example, a cashier's check is a type of official check.

Certified checks, letters of credit, and travelers' checks, for which an insured depository institution is primarily liable, also are insured when issued in exchange for money or its equivalent, or for a charge against a deposit account.

Q. What is not insured by the FDIC?

A. The FDIC does not insure the money individuals invest in stocks, bonds, municipal bonds, or other securities; mutual funds, (including money market mutual funds, and mutual funds that invest in stocks, bonds and other securities); annuities (which are contracts underwritten by insurance companies that guarantee income in exchange for a lump sum or periodic payment); or insurance products such as automobile and life insurance even if these products were purchased at an insured bank or through an affiliated broker/dealer/insurance agent that is offering these products on behalf of a bank.

The FDIC does not insure U.S. Treasury bills, bonds, or notes, but these are backed by the full faith and credit of the United States Government.

Also, the FDIC insurance doesn't cover valuables in safe deposit boxes. These contents, however, may be covered either by the bank's private insurance or the box holder's personal homeowner's insurance.

Furthermore, the FDIC does not insure against loss of funds due to robberies and other thefts. Stolen funds may be covered by what's called a bank's Hazard and Casualty insurance, which is a policy a bank purchases to protect itself from fire, flood, earthquake, robbery, and physical damage. In those rare instances where a bank employee may tamper with a customer's account, the bank's blanket bond insurance (also called fidelity bonds) may cover the loss and the funds would be returned to the customer. Consumer protection laws such as the Electronic Funds Transfer Act offer protections if a third party somehow gains access to a customer's account.

Q. What types of financial institutions are insured by the FDIC?

A. The FDIC insures deposits in most, but not all, banks and savings associations. All FDIC-insured institutions must display an official sign at each teller window or teller station.

Q. Can insurance coverage be increased by depositing funds with different insured banks?

A. Deposits with each FDIC-insured bank are insured separately from any deposits held at another insured bank. If an insured bank has branch offices, the main office and all branch offices are considered one insured bank. A depositor cannot increase insurance coverage by placing deposits at different branches of the same insured bank. Similarly, deposits held with the Internet division of an insured bank are considered the same as funds deposited with the "brick and mortar" part of the bank, even if the Internet division uses a different name. Financial institutions that may be owned by the same holding company, but that are separately chartered, are separately insured. Separately chartered banks have different FDIC Certificate numbers.

Q. Can insurance coverage be increased by dividing my deposits into several different accounts at the same insured bank?

A. Deposit insurance coverage can be increased only if the accounts are held in different categories of ownership. These categories include the four most common consumer ownership categories: single accounts, self-directed retirement accounts, joint accounts, and revocable trust accounts; and the less common ownership categories: irrevocable trust accounts, employee benefit plan accounts, corporation, partnership and unincorporated association accounts, and public unit accounts.

Q. Can insurance coverage be increased by using a different co-owner's Social Security number on each account or changing the way the owners' names are listed on the accounts?

A. Using different Social Security numbers, rearranging the order of names listed on accounts or substituting "and" for "or" in joint account titles does not affect the amount of insurance coverage available to account owners.

Q. Can insurance coverage be increased by dividing my funds and depositing them into several different accounts?

A. Federal deposit insurance is not determined on a per-account basis. A depositor cannot increase FDIC insurance by dividing funds owned in the same ownership category among different accounts. The type of deposit instrument — whether checking, savings, or CD — has no bearing on the amount of insurance coverage.

Q. What happens when banks merge?

A. If an account owner has deposits in Bank A and Bank B and Bank A merges into Bank B, deposits of Bank A continue to be insured separately from the deposits of Bank B for at least six months after the date of the merger. CD's from Bank A, the assumed bank, are separately insured until the earliest maturity date after the end of the six month grace period.

Q. What happens when a bank fails?

A. The FDIC would either transfer the insured depositor's account to another FDIC insured bank, or give the insured depositor a check equal to their account balance. This includes the principal and interest accrued through the date of the bank's closing, up to the insurance limit.

Q. If a bank fails, what is the timeframe for payout of the funds that are insured if the bank cannot be acquired by another financial institution?

A. Federal law requires the FDIC to make payments of insured deposits "as soon as possible" upon the failure of an insured institution. While every bank failure is unique, there are standard policies and procedures that the FDIC follows in making deposit insurance payments. It is the FDIC's goal to make deposit insurance payments within one business day of the failure of the insured institution. Typically, a bank that has failed will be closed on a Friday. The FDIC will then work the weekend to complete deposit insurance determinations for most deposits and be prepared on Monday to either transfer the insured portion of a deposit to another FDIC insured institution or provide deposit insurance payment checks. (Note: Some deposits that require supplemental documentation from the depositors, such as accounts linked to a living trust agreement or funds placed by a deposit broker, may take a little longer. The timing of the completion of the deposit insurance determination is based solely on the depositor providing the documentation needed by the FDIC to determine insurance coverage.)

Q. What happens to customers with uninsured deposits?

A. Customers who have uninsured deposits may recover a portion of their uninsured funds, but there is no guarantee that they will recover any more than the insured amount. The amount of uninsured funds they may receive, if any, is based on the sale of the failed bank's assets. Depending on the quality and value of these assets, it may take several years to sell all the assets. As assets are sold, uninsured depositors receive periodic payment on their uninsured deposit claim.