Consumers ask: How safe are our investments?

The turmoil in the financial markets has triggered a slew of questions from consumers worried about their money in financial services and investment companies.

Here are some answers to the most common questions:

Q. Is your brokerage account safe?

There are multiple layers of protection for brokerage accounts.

Brokerage firms are required to meet minimum net capital requirements to reduce the likelihood of insolvency, and to be members of the Securities Investor Protection Corp., or SIPC, which insures customer securities accounts up to $500,000.

Although Congress created it in 1970, SIPC is not a government agency and doesn't work the same as the Federal Deposit Insurance Corp., which insures bank deposits and is a government agency.

SIPC is a nonprofit membership corporation funded by its member securities firms. It doesn't offer investors the same blanket protection that the FDIC provides to bank depositors.

When a brokerage is closed because of bankruptcy or other financial difficulties and customer assets are missing, SIPC works to return customers' cash, stock and other securities. If any assets are missing, a reserve fund maintained by SIPC meets each investor's remaining claims up to $500,000 per customer, including a maximum of $100,000 for cash claims.

SIPC doesn't cover investment losses due to market fluctuations, and it doesn't protect investors who are sold worthless stocks and other securities.

Q. Should annuity owners in general pull their money because of the government takeover of American International Group, one of the world's largest insurance companies?

An annuity is a financial product sold by an insurance company. If an insurance company can't pay claims, state guaranty funds, such as the Texas Guaranty Association, step in and provide coverage.

“In general, the insurance markets and the insurers are healthy,” said Sandy Praeger, president of the National Association of Insurance Commissioners, which represents state insurance regulators. “If a person has an annuity with an insurer, there is no need to panic and cash out the annuity. In fact, there might be costly penalties associated with that action.”

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