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The Federal Deposit Insurance Corporation (FDIC) recently closed nine banks in one day. The closings boosted the number of failed US banks this year to 115. Given that, and the recent turmoil at CIT Group, you might be worried about the safety of your money in financial services and investment companies.

What advice do financial planners have for Americans who are worried about the money they have in banks and brokerage accounts? Here’s what FPA member Sam Hull, CFP®, CPCC, a partner with Whitewater Transitions, had to say:

Investment accounts at all major brokerage houses and broker/dealers are covered by Federal law through the Securities Investor Protection Corporation (SIPC). This insurance against failure or bankruptcy covers stocks, bonds, mutual funds, exchange-traded funds (ETFs) and other assets (but not futures or commodity contracts) held up to $500,000 per account, including a $100,000 limit on cash. Money market funds are considered funds, not cash. Most major brokerage houses & broker/dealers also have large amounts of private insurance above and beyond SIPC amounts. Check with your firm to determine their coverage limits.

In addition, the Securities and Exchange Commission (SEC) has tough rules about keeping the broker/dealers funds separated from the customer’s investments. If the broker goes belly-up like Lehman Brothers, your money should remain intact. In the unlikely event of a brokerage failure, SPIC will transfer your securities to another firm. If for some reason that can’t be done, SIPC will try to rebuild your portfolio, even buying new shares for you. If that can’t be done for some reason, they will give you cash.

The bad news: all this takes time and thus gives you lots of time to worry.

SIPC does not cover Ponzi schemes or other investment fraud perpetrated by an adviser. If you have the bad luck (or bad sense) to be taken in by a Madoff-type scam, this is not covered by SIPC. Most major broker/dealers do have their own policies to cover fraudulent activities. For example, if you lose cash or securities from your account due to unauthorized activity, they will reimburse you for the cash or shares of securities you lost.

However, if a broker goes bust and your investments are missing from your account, the SPIC will replace them up to the half million dollar maximum. But they won’t compensate you for any losses in value that may have occurred while the securities were missing. It is your responsibility to file a claim with SPIC for missing assets within six months.

So what can you do to protect yourself?

1. Make sure your investment accounts are held in custody by a brokerage firm or broker/dealer – not by your investment adviser or financial planner.

2. Make sure that your brokerage house or broker/dealer is a member in good standing with the SPIC.

3. Check to make sure your trades and other transactions are made through that entity and not some unrelated subsidiary that is not covered by SIPC.

4. Make sure your account is registered by default as a cash account and not defaulted to a margin account. Margin accounts make you just another creditor of the brokerage house.

5. Read the fine print of your account registration form. Don’t authorize your broker to use your account assets for any purpose you don’t authorize. The default language allows them to lend your stock (and charge a hefty fee) to short sellers, hedge funds, corporate raiders and buyout funds without offsetting collateral in house.

6. Ask questions until you are satisfied with the answers and don’t be put off by fast talk or complicated jargon. It’s your money.

A Certified Financial Planner can help you better understand your savings and investment accounts. Visit http://www.fpanet.org/PlannerSearch.

Charles Sims Jr. is president/CEO of The Sims Financial Group. Contact him at 901-682-2410 or visit http://www.SimsFinancialGroup.com.

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