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Most brokerages in the US are members of the SIPC. The SIPC provides an insurance for customers up to $500,000 for cash and securities held by the brokerage in case of troubles (bankruptcy, assets missing, etc). The SIPC protection for customers with multiple accounts is determined by "separate capacity" and they have a webpage on it here.

Let's say, as an example, you're an investor with $1.25 million. Is there any reason why you wouldn't want to open 3 different accounts with different brokerages and split your assets so that all your assets are covered under SIPC? In this case, you can open accounts Acc1, Acc2, Acc3, each with different brokerages so it's considered "separate capacity" by the SIPC, and Acc1 and Acc2 can have $500,000 in assets and Acc3 has $250,000 in assets.

There's a similar question asking about the downsides of having multiple investment accounts in general but I'm curious about how SIPC limits would factor into this consideration. I'm also assuming that if you're obscenely rich, there won't be enough brokerages to split your assets among or that the risk of a brokerage going under is so small that this isn't a factor.

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    Basically, it’s annoying to keep track of all of them. No other reason.
    – Aganju
    Dec 8, 2021 at 20:08

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Let's say, as an example, you're an investor with $1.25 million. Is there any reason why you wouldn't want to open 3 different accounts with different brokerages and split your assets so that all your assets are covered under SIPC?

Because there are brokers covered by "Excess SIPC" insurance.

Charles Schwab

Additional brokerage insurance—in addition to SIPC protection—is provided to Charles Schwab & Co., Inc. accounts through underwriters in London. Schwab’s coverage with Lloyd's of London and other London insurers, combined with SIPC coverage, provides protection of securities and cash up to an aggregate of $600 million, and is limited to a combined return to any customer from a Trustee, SIPC, and London insurers of $150 million, including cash of up to $1,150,000. This additional protection becomes available in the event that SIPC limits are exhausted.

https://www.schwab.com/legal/sipc-account-protection

Interactive Brokers

Client securities accounts at Interactive Brokers LLC are protected by the Securities Investor Protection Corporation ("SIPC") for a maximum coverage of $500,000 (with a cash sublimit of $250,000) and under Interactive Brokers LLC's excess SIPC policy with certain underwriters at Lloyd's of London for up to an additional $30 million (with a cash sublimit of $900,000) subject to an aggregate limit of $150 million. Futures and options on futures are not covered. As with all securities firms, this coverage provides protection against failure of a broker-dealer, not against loss of market value of securities.

https://www.interactivebrokers.com/en/index.php?f=2334&p=acc&conf=am

Robinhood

We have purchased an additional insurance policy for Robinhood Markets, Inc., Robinhood Financial LLC, and Robinhood Securities, LLC through Lloyds of London to supplement SIPC protection , and becomes available to customers in the event that SIPC limits are exhausted. This additional insurance policy provides protection for securities and cash up to an aggregate of $100 million, and is limited to a combined return to any customer of $10.5 million, including cash of up to $1.75 million. Similar to SIPC protection, this additional insurance does not protect against a loss in the market value of securities.

https://cdn.robinhood.com/assets/robinhood/legal/RHF%20SIPC%20and%20Account%20Protection.pdf

Merill Edge (Merrill Lynch of Bank of America)

(Didn't say the limit for per client, but the aggregate is even higher than Charles Schwab. Proportionally it is $250 million per client)

MLPF&S has obtained private insurance coverage from a Lloyd’s of London syndicate to provide additional protection for very large client accounts. For customers who have received the full SIPC limits, further protection (including up to $1.9 million for cash) is provided by this policy, subject to an aggregate loss limit of $1 billion for all customer claims.

https://mlaem.fs.ml.com/content/dam/ML/social-pdf/Merrill_FraudProtection_PDF.pdf

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