and Ziegler are members of the Securities Investor Protection
Corporation (SIPC®). As a result, investor-owned assets held in custody
by Pershing are protected by SIPC, up to $500,000 in value, including
$100,000 in cash awaiting reinvestment. SIPC provides protection for
eligible client assets held in custody by a SIPC member brokerage firm
should the SIPC member firm fail financially and become unable to meet
the obligations to its clients. SIPC does not protect assets that are
not held in custody by a SIPC member. SIPC does not protect against
losses due to market fluctuation or for client assets not held by a
SIPC member. For more information about investor asset protection,
visit SIPC’s Web site atwww.sipc.org. In addition to SIPC protection, Pershing also provides coverage in excess of SIPC limits through Lloyds of London.
excess 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
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.
Federal Deposit Insurance Corporation (FDIC®) is an independent agency
of the U.S. government that provides protection for insured deposits at
a failed FDIC-insured bank. FDIC-insured investments are insured by the
FDIC up to applicable limits, generally $250,000. In the case
of Pershing’s FDIC-Insured Deposits Program and the Certificate of
Deposit Account Registry Service® (CDARS®), investors can access FDIC
insurance for deposits in multiple FDIC insured institutions with a
single investmetnt.1,2 Pershing also offers investors access to Brokered CDs and FDIC-insured bonds.2
CDs are certificates of deposit of a commercial bank or savings and
loan association that are sold through an intermediary instead of the
savings and loan institution itself. Brokered CDs are covered by FDIC
insurance up to applicable limits and are available in both the new
issue and secondary markets in maturities as short as one month to as
long as 10 or more years.
FDIC-insured bonds were created by the
FDIC’s new Temporary Liquidity Guarantee Program. The program
guarantees newly issued senior unsecured debt of eligible institutions — issued on or after October 14, 2008, and before June 30, 2009. It
also provides full deposit insurance coverage for non-interest-bearing
deposit transaction accounts in FDIC-insured institutions, regardless
of the dollar amount.
For additional information about the
financial strength of Pershing and the protection of investors’ assets
held in custody, visit the safety and soundness section on www.pershing.com. For more information about the FDIC, visit www.fdic.gov.
How are policyholders protected, in the event that the insurer fails?
Most states have guaranty funds to help pay the claims of financially
impaired insurance companies. State laws specify the lines of insurance
covered by these funds and the dollar limits payable. Coverage is
usually for individual policyholders and their beneficiaries and not
for values held in unallocated group contracts. Most states also
restrict insurance agents and companies from advertising the funds’
availability.WHAT HAPPENS IF AN INSURANCE COMPANY GOES INSOLVENT?
The failure of an insurance company is administered differently than
other business bankruptcies. This is because insurance is regulated by
the states and failures are not governed by federal bankruptcy law.
an insurance company becomes insolvent and is unable to pay outstanding
claims, a state’s courts and the insurance commissioner begin a legal
process to determine appropriate action for the company.
are several approaches a commissioner might take with a troubled
company. He or she might opt for conservation, a judicial proceeding
that gives the commissioner direct control over the assets of an
insurer. Another step a commissioner might take prior to liquidation is
placing the company into rehabilitation. Under rehabilitation the
commissioner takes title to insurers’ assets, and closely supervises
the company with the view toward rehabilitating it.
resort” option is liquidation. During liquidation the commissioner or a
representative becomes the receiver of the company’s “estate.” The
receiver marshals the company’s assets, determines liabilities and
begins distributing assets to the estate’s creditors. Current policies
are cancelled, and policyholders are notified and directed to seek
ENTER THE GUARANTY FUNDS
Liquidation does not halt the obligation to pay outstanding claims
against the company. Instead, it triggers involvement of the guaranty
funds in all states where the insolvent insurer is licensed to transact
its insurance business. The guaranty funds step into the shoes of the
insolvent company to pay the covered claims of each state’s residents.
The funds pay claims to policy amounts or limits set by state law.
In this way, guaranty funds ensure covered claimants and policy
beneficiaries are among the first to be paid. Guaranty funds free
claimants from having to wait several years for what likely would be
only a fraction of the claim amount they would receive were it not for
COVERED WITHIN STATUTORY LIMITS
State statute determines coverage limits of the guaranty fund system.
This means the guaranty funds pay claims at the policy amount or within
statutory limits, whichever is lower: that is, “caps,” fixed by the
vary from state to state. Typically the claim limit is $300,000 except
for workers compensation claims that are paid in full. A small minority
of states have limits that are above or below the $300,000 threshold.
caps, which were established in the early days of guaranty funds,
reflect the original intent of the system: to protect individuals and
small businesses – those potentially hardest hit by insolvencies. Caps
enable the guaranty fund system to ensure sufficient funds, or
“capacity,” needed to serve all claimants.
FUNDED BY ASSESSMENTSGuaranty
funds have a claim against the insolvent estate for their claim
payments, and can often get access to such funds that are available on
an accelerated basis. However, estate assets, which are almost always
not readily available when the guaranty fund mechanism is first
activated, often are not sufficient to pay guaranty fund obligations in
full. For this reason, guaranty associations are empowered by state law
to obtain needed funds through mandatory assessments on the insurance
industry. These assessments raise funds to pay claims and
administrative and other estate-related costs.
This site has been published in the United States for residents of the United States. The foregoing has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Securities, products and services offered through B.C. Ziegler and Company Member FINRA and SIPC.