Describe what protection applies when a Singapore-licensed or US-registered broker fails, and where that protection stops.
Every few years a broker collapses somewhere in the world, and investors start asking whether their shares are safe. Most answers in group chats are guesses. "The government guarantees it" and "it's all gone" are both usually wrong. The real answer depends on details most investors have never checked.
You can lose money in an account in two ways. The first is that prices fall. If a fund you own drops 30%, an example figure, you bear that loss, and no protection scheme anywhere covers it. The second is that the firm holding your assets fails, and its records or its handling of client property have gone wrong. Say you owned 50 shares, the firm failed, and now the shares or the cash are missing or tied up. The schemes below deal only with this second problem.
A broker licensed by MAS to deal in capital markets products must keep customer money and assets separate from the firm's own. This is called segregation. Client money goes into trust accounts, and client securities sit in custody accounts set up for customers. If the firm fails, its creditors cannot take your shares to pay its debts, because the shares never belonged to the firm.
Segregation is strong protection when the rules have been followed. It is not a guarantee, though, and it does not pay a fixed sum. If records are wrong or assets have been misused, recovery can be slow and may be only partial. Segregation is only as good as the firm's compliance and the custodian it uses, which is one reason lesson 1.4 asks you to read the custody section of your broker agreement.
SDIC, the Singapore Deposit Insurance Corporation, insures eligible Singapore dollar deposits at member banks and finance companies, up to a limit per depositor per member. Lesson 1.3, "What SDIC deposit insurance covers and what it does not", in the course How money works, covers it in detail. Shares, ETFs and unit trusts are not deposits, so SDIC does not cover them. Cash held in a brokerage account is not an SDIC deposit either, even when the broker belongs to a bank group. Check the current limit and the list of member institutions on sdic.org.sg.
Accounts with a US broker-dealer may be covered by SIPC, the Securities Investor Protection Corporation. SIPC acts when a member broker-dealer fails and customer assets are missing. It works to return customers' securities and cash. Where assets are missing, it can cover the shortfall up to a set limit per customer, with a lower sub-limit for cash. Look up the current limits on sipc.org and write them down. Don't repeat a figure from a forum, because it may be out of date. SIPC does not cover market losses.
SIPC covers only customers of the member firm itself, so the legal entity you are booked with matters, as lesson 1.2 explained. If an international broker booked you with its Singapore subsidiary, your account is with a Singapore entity under MAS rules, and the US parent's SIPC membership may not cover you. If you were booked with the US entity, SIPC might apply. The same app and the same logo can come with different protection, depending on the entity.
Some brokers buy private insurance on top of SIPC, sometimes called excess coverage. It is specific to that firm's arrangements. If your broker mentions it, read the terms in the firm's own disclosures.
Brokers licensed in other countries fall under their home regulator's scheme, if that country has one. The UK, Hong Kong and Australia, among others, have their own client-asset rules and compensation arrangements, each with different limits and conditions. You don't need to learn every country's scheme. You need to know which one applies to each of your accounts and where its official website is. The legal entity decides which scheme applies, whatever brand is on the app.
Rachel, an example investor, read about a failed crypto platform and asked whether her own assets were safe. She held US shares with an international broker, SGX shares with a local broker, and her emergency fund in a bank. She had assumed one safety net covered all three, and it did not. She spent one evening working out which scheme applied to each account.
Her bank deposits were Singapore dollars at an SDIC member, so SDIC applied up to its limit. Her local broker was licensed by MAS, so segregation rules applied, with no fixed payout scheme. Her international broker had booked her with an entity outside both Singapore and the US, so neither MAS segregation rules nor SIPC applied. She looked up that country's regulator and its scheme, wrote down the limit and the website, and marked it as the account to watch most closely. She finished with a short list: one line per account, the scheme that applies, and the official site for its current limits.
To do the same, start from the legal entity names you found in lesson 1.1, and check each account:
Bank deposits: check that they are eligible Singapore dollar deposits at an SDIC member, then confirm the limit and membership on sdic.org.sg. MAS-licensed broker: segregation applies, with trust accounts for cash and custody accounts for securities, and there is no fixed payout. Read the custody section of your agreement (lesson 1.4). US broker-dealer entity: check SIPC membership and the current limits, including the cash sub-limit, on sipc.org. Entity in another country: identify that country's regulator and compensation scheme, and record its limit and official website. Any broker that mentions excess coverage: read its terms in the firm's own disclosures.
Now write your list, one line per account, naming the scheme that applies and the official website where its current limits are published.
For each of your accounts, write down which protection scheme applies, if any, and the official website where you would check its current limits.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).