SERIES 7 | FINANCIAL REGULATION COURSES
FINRA Rule 2266 — SIPC Information — requires virtually all FINRA member firms to advise all new customers in writing at the opening of an account that they may obtain information about the Securities Investor Protection Corporation — including the SIPC brochure — by contacting SIPC, and to provide the SIPC website address and telephone number with that notification, and to repeat this same written disclosure to all customers at least once each year — creating the foundational investor awareness obligation that ensures every brokerage customer in the United States knows that SIPC exists, what it does, and how to contact it for more information about the protection it provides.
SIPC — the Securities Investor Protection Corporation — is a nonprofit, non-governmental membership corporation created by the Securities Investor Protection Act of 1970, funded by assessments on its broker-dealer members, that exists to restore cash and securities to customers of failed FINRA member firms up to statutory limits in the event of broker-dealer insolvency. SIPC protection is not investment insurance — it does not protect against market losses, poor investment recommendations, or investment fraud — but it does protect against the specific risk of a customer's broker-dealer failing financially and being unable to return the customer's assets.
Rule 2266 was adopted November 6, 2007 and last amended August 17, 2009 — a deliberately simple rule whose brevity reflects the simplicity of its purpose. The rule does not require member firms to explain SIPC coverage in detail or to quantify the coverage limits — it requires only that firms ensure customers know SIPC exists and know how to contact SIPC directly to obtain the complete information they need.
What SIPC Is and What It Covers — The Essential Context
Understanding Rule 2266's disclosure obligation requires understanding what SIPC is and why the disclosure matters to investors — information that every registered representative must know regardless of whether it is specifically required to be included in the Rule 2266 disclosure itself.
SIPC protection covers customers of SIPC member broker-dealers when those broker-dealers fail financially — specifically when customer cash and securities cannot be returned because the broker-dealer has become insolvent and the assets it should be holding for customers are missing, misappropriated, or otherwise unavailable. SIPC steps in as quickly as possible and works to return customers' cash, stock, and other securities up to its statutory coverage limits.
The current SIPC coverage limits are five hundred thousand dollars per customer — including up to two hundred and fifty thousand dollars for cash claims. Securities coverage and cash coverage are separate limits within the overall five hundred thousand dollar per customer maximum — a customer with four hundred thousand dollars in securities and two hundred and fifty thousand dollars in cash would have the full cash amount covered and four hundred thousand dollars of securities covered for a total of six hundred and fifty thousand dollars but would be capped at five hundred thousand dollars in total recovery.
The per customer limit is applied separately to each separate customer capacity — meaning a customer who has both an individual account and an IRA at the same failed broker-dealer may be eligible for up to five hundred thousand dollars per account type if the accounts qualify as separate customers under SIPC's rules.
SIPC does not cover losses from market fluctuations in the value of investments. If a customer owns stock that declines in value SIPC does not compensate for that decline. SIPC does not cover losses from unsuitable investment recommendations, broker misconduct that does not involve insolvency, or investment fraud that does not result in broker-dealer failure. SIPC protects against the narrower risk of broker-dealer insolvency where the customer's assets cannot be returned.
The Two Timing Requirements
Rule 2266 establishes two distinct and independently applicable timing requirements for the SIPC information disclosure — creating both a new customer disclosure obligation and an ongoing annual disclosure obligation.
The first requirement is the new customer disclosure — at the opening of an account the member must advise the new customer in writing that they may obtain information about SIPC including the SIPC brochure by contacting SIPC, and must provide the SIPC website address and telephone number. The account opening timing ensures that customers know about SIPC protection from the very beginning of their relationship with the firm — before they deposit funds or hold securities in their account.
The second requirement is the annual disclosure — at least once each year the member must provide all customers with the same SIPC information in writing. The annual repetition requirement ensures that customers who may have forgotten the initial account opening disclosure are reminded of SIPC's existence and contact information on a regular basis — and that customers whose relationship with the firm predates the rule's adoption eventually receive the disclosure.
The annual disclosure must be provided to all customers — not merely to customers who opened accounts in the current year. A customer who has maintained an account at the same firm for twenty years must receive the annual SIPC information disclosure every year.
The Dual Firm Allocation Provision
Rule 2266 includes a practical allocation provision for the common introducing broker-dealer and clearing broker-dealer structure — where both an introducing firm and a clearing firm service the same customer account.
In cases where both an introducing firm and clearing firm service an account the firms may assign the Rule 2266 disclosure requirements to one of the firms. This allocation provision eliminates the potential for duplicate compliance burden where both firms might otherwise independently satisfy the same disclosure obligation for the same customer — creating an inefficient and confusing situation for customers who receive the same SIPC disclosure from two different firms.
The allocation must be clearly documented between the firms — typically addressed in the carrying agreement that governs the relationship between the introducing and clearing firm under FINRA Rule 4311. The designated firm assumes complete responsibility for satisfying the Rule 2266 obligations — the non-designated firm is fully relieved of those obligations provided the allocation is properly documented and the designated firm actually performs the required disclosures.
What the Disclosure Must Contain
Rule 2266's disclosure requirement is deliberately minimalist — member firms must advise customers that they may obtain information about SIPC including the SIPC brochure by contacting SIPC, and must provide the SIPC website address and telephone number.
The current SIPC contact information that must be included is the SIPC website — www.sipc.org — and the SIPC telephone number — (202) 371-8300. These are the specific contact details that allow customers to access the complete SIPC brochure and all other information SIPC provides about its protection and operations.
Member firms are not required by Rule 2266 to explain the coverage limits, describe what SIPC does and does not cover, or provide any additional information beyond the basic contact referral. The rule's drafters deliberately chose a minimalist approach — directing customers to SIPC itself for the complete information rather than requiring member firms to provide a potentially incomplete or inaccurate summary.
Member firms may and often do provide additional SIPC information beyond the rule's minimum requirements — including the coverage limits and an explanation of what SIPC protects against — as part of their account opening documentation or annual customer communications. Such additional information is permissible and often advisable but is not required by Rule 2266 itself.
The Two Exemptions — Who Is Not Required to Comply
Rule 2266 applies to all FINRA member firms with two specific exceptions — each identifying a category of member firm for which the SIPC disclosure requirement does not make sense because those firms either are not SIPC members or exclusively sell products that SIPC does not cover.
The first exception covers members that are excluded from SIPC membership under Sections 3(a)(2)(A)(i) through (iii) of SIPA and that are not SIPC members. The SIPA provisions referenced exclude certain categories of entities from compulsory SIPC membership — including government broker-dealers, certain insurance company affiliated broker-dealers, and broker-dealers that deal exclusively in mutual funds and variable insurance products that are covered by other regulatory frameworks. A firm that is not a SIPC member and is not required to be one need not advise customers about SIPC coverage that does not apply to their account.
The second exception covers members whose business consists exclusively of the sale of investments that are ineligible for SIPC protection. Certain investment products are specifically excluded from SIPC coverage — including futures contracts, commodity contracts, fixed annuities, and most insurance products. A broker-dealer whose entire business consists of selling only these non-covered products need not advise customers about SIPC protection that is inapplicable to any of their holdings at the firm.
The 2026 Regulatory Context — Misleading SIPC Communications
The 2026 FINRA Annual Regulatory Oversight Report — published December 9, 2025 — and the accompanying FINRA leadership podcast identified misleading SIPC coverage communications as a current enforcement concern — specifically in the context of cryptocurrency-related business communications.
FINRA's enforcement programme identified cases where member firms' communications about crypto assets overstated SIPC protections — implying or stating that SIPC coverage applies to crypto assets when in fact SIPC protection does not extend to most cryptocurrency holdings because crypto assets are not typically securities held in the way that traditional brokerage securities are held. SIPC's own guidance confirms that cryptocurrency is generally not protected under SIPA because it is not a security under the statutory definition applicable to SIPC coverage.
FINRA leadership specifically noted during a December 2025 podcast discussing the oversight report — that communications around SIPC coverage must be exact and precise — and that FINRA has seen issues with firms not being clear about whether SIPC coverage is provided to the crypto business being described and whose affiliate is actually offering the crypto assets.
This enforcement concern connects Rule 2266's disclosure obligation to the broader communications standards of FINRA Rule 2210 — a member firm that accurately complies with Rule 2266's minimum disclosure of SIPC contact information while separately making misleading statements about SIPC's scope of coverage in its marketing materials has violated Rule 2210 even though it has technically satisfied Rule 2266. The accuracy of SIPC-related disclosures beyond the minimum Rule 2266 requirement is governed by Rule 2210's prohibitions on false and misleading communications.
Connection to SIPC and the Investor Protection Framework
Rule 2266 is one component of the broader investor protection disclosure framework — operating alongside the Investor Education and Protection disclosures of FINRA Rule 2267, the margin disclosure requirements of FINRA Rule 2264, and the account statement requirements of FINRA Rule 2231 to ensure that customers have access to the complete information they need to understand the protections available to them and the risks they bear in maintaining a brokerage account.
SIPC's website — www.sipc.org — provides the complete SIPC brochure, detailed explanation of how SIPC protection works, the process for filing a SIPC claim in the event of broker-dealer failure, and the current list of SIPC member firms. The Rule 2266 disclosure directs customers to this resource — trusting SIPC itself to provide accurate and complete information rather than requiring every broker-dealer to independently summarise a complex statutory protection scheme.
Examination Relevance and Key Takeaways
FINRA Rule 2266 is tested on the Series 7 examination in the context of SIPC, investor protection disclosures, and the timing and content requirements of the SIPC information obligation.
The key points to retain are these.
FINRA Rule 2266 — SIPC Information — requires member firms to advise all new customers in writing at account opening that they may obtain information about SIPC including the SIPC brochure by contacting SIPC — providing the SIPC website address www.sipc.org and telephone number (202) 371-8300. The same written disclosure must be provided to all customers at least once each year. Two exceptions apply — members excluded from SIPC membership that are not SIPC members, and members whose business exclusively involves products ineligible for SIPC protection.
In introducing-clearing firm relationships the disclosure obligations may be assigned to one firm — eliminating duplicate disclosure to the same customer. Rule 2266 requires only the minimum contact referral — it does not require explanation of coverage limits or what SIPC does not cover. However any additional SIPC-related statements made by the firm must satisfy Rule 2210's accuracy standards — the 2026 FINRA Annual Regulatory Oversight Report specifically identified misleading SIPC coverage communications — particularly overstating SIPC protection for crypto assets that SIPC does not cover — as a current enforcement concern requiring that SIPC-related communications be exact and precise.
SIPC coverage is five hundred thousand dollars per customer including up to two hundred and fifty thousand dollars for cash — tested directly on the Series 7 examination. SIPC does not protect against market losses, unsuitable recommendations, or investment fraud — it protects against broker-dealer insolvency where customer assets cannot be returned.
