You will be able to describe the protection that applies when a Singapore-licensed or US-registered broker fails, and its limits.
Every few years a broker somewhere in the world collapses, and the same question goes round the group chats: are my shares safe? Most of the answers are guesses. Someone says the government guarantees it. Someone else says it's all gone. Neither is usually right, and the truth depends on details most investors have never looked up.
Rachel asked the question when she read about a failed crypto platform. Her US shares sat with an international broker, her SGX shares with a local one, and her emergency fund in a bank. She assumed one safety net covered all three. It didn't, and finding out which net applied to which account took her one evening.
Start by separating two things that get mixed up. One is losing money because prices fall. The other is losing assets because the firm holding them fails and something has gone wrong with its records or its handling of client property.
No protection scheme anywhere covers the first. If you buy a fund and it drops 30%, that loss is yours. The schemes in this lesson deal only with the second problem: you owned 50 shares, the firm went under, and the shares or the cash are missing or tied up. Keep that line clear and most of the confusion goes away.
A broker licensed by MAS to deal in capital markets products must keep customer money and assets apart from the firm's own. Client money goes into trust accounts, and client securities are held in custody accounts set up for customers. The point of segregation is that if the firm fails, its creditors cannot claim your shares to pay the firm's debts, because the shares were never the firm's property.
That is strong protection when the rules have been followed. It is not a guarantee that pays out a fixed sum. If records are wrong or assets have been misused, recovery can be slow and may be partial. The protection is only as good as the firm's compliance and the custodian it uses, which is one reason lesson 1.4 has you read the custody section of your agreement.
Now the bank deposit side. 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. How money works covered this in lesson 1.3, What SDIC deposit insurance covers and what it does not. Shares, ETFs and unit trusts are not deposits, so SDIC does not cover them. Cash sitting in your brokerage account is not an SDIC deposit either, even if the broker belongs to a bank group. Check the current limit and the list of members on sdic.org.sg.
If your account is held with a US broker-dealer, a different scheme may apply. The Securities Investor Protection Corporation, usually called SIPC, steps in when a member broker-dealer fails and customer assets are missing. It works to return customers' securities and cash, and where assets are missing it can make up the shortfall up to a set limit per customer, with a lower sub-limit for cash. The current limits are on sipc.org. Look them up there and write them down rather than repeating a figure from a forum, which may be out of date.
SIPC does not cover market losses, and it only covers customers of the member firm itself. This is where lesson 1.2's point about the licensing entity matters. If your 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 reach you. If you were booked with the US entity, it might. Same app, same logo, different protection.
Some brokers also buy private insurance on top of SIPC, sometimes called excess coverage. If yours mentions it, read the terms and treat it as a detail of that firm's arrangements, which you can verify in its own disclosures.
Brokers licensed elsewhere fall under their home regulator's scheme, if there is one. The UK, Hong Kong and Australia, among others, have their own rules on client assets and their own compensation arrangements, each with different limits and conditions. You do not need to learn them all. You need to know which one applies to each account you hold and where its official website is.
Rachel worked through her three accounts. Her bank deposits were in 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 turned out to have booked her with an entity outside Singapore and outside 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 noted it as the account to watch most closely.
She ended with a short list: one line per account, the scheme that applies, and the official site where the current limits live. That list is what the activity asks you to make. Use the legal entity names you found in lesson 1.1, since the entity, not the brand, decides the answer.
For each of your accounts, write 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).