IMPORTANT SIPC FACTS ABOUT MONEY MARKET FUNDS FOR CANDIDATES TAKING THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE)
If you plan to take the Securities Industry Essentials (SIE) Exam, you should make sure that you study and know about the rules of Securities Investor Protection Corporation, or SIPC. Why do you need to know about SIPC? The answer is that rules of SIPC are included in FINRA's Content Outline for the SIE Exam.
You need to know what is covered by SIPC protection, how it is covered, and to what extent. For example, are money market funds covered? Here is what SIPC itself says about money market funds:
"ARE
MONEY MARKET MUTUAL FUNDS PROTECTED BY SIPC? ARE THEY SUBJECT TO THE $250,000
CASH LIMIT?
"Money
market mutual fund shares held in a customer’s account at a brokerage firm qualify
as “securities” under the Securities Investor Protection Act (SIPA) and
therefore are subject to the $500,000 limit of protection, not the $250,000
limit applicable to cash. It is important to remember that, although many
investors treat money market funds like cash, they are securities and, as such,
may lose value. In a liquidation proceeding under SIPA, subject to the limits
of SIPC protection, SIPC will return money market fund shares to a customer,
but will not protect the customer against any decline in the value of those
shares."
https://www.sipc.org/for-investors/investor-faqs
SIPC therefore will protect money market mutual funds if held by a SIPC-registered brokerage firm, and the brokerage firm goes into SIPC liquidation. The money market fund is considered a "security" and the brokerage firm is a SIPC member.
Furthermore, notice that the money market fund is not considered "cash," but a security, therefore eligible to be protected up to $500,000, whereas cash is protected up to a limit of only $250,000.
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