SIE Ready🏛️ Regulators & Market Participants · Lesson 3 of 5 · 5 min
The Fed, Treasury, the States, FDIC and SIPC
🗺️ Same customer, same afternoon: her bank CD is FDIC-insured, her brokerage account is SIPC-protected, and her rep answers to both FINRA and her state. Each body has a different job.
💡 Key idea
Fed = monetary policy and margin credit (Reg T); Treasury/IRS = government debt and taxes; states = blue-sky laws (NASAA coordinates); FDIC = bank deposits; SIPC = failed brokerage firms.
🧠 Why it matters
The Federal Reserve runs monetary policy, supervises many banks and sets the credit rules for buying securities on margin (Regulation T). The Treasury issues US government securities to fund the government; its bureau the IRS administers federal tax law, including retirement-account rules. States regulate securities too, through 'blue-sky' laws. Many states base theirs on the model Uniform Securities Act, and state administrators register or license broker-dealers, agents, advisers and offerings in their state. NASAA is the association of those state (and provincial) regulators; it coordinates and writes model rules but is not itself a regulator. Finally, two protectors: the FDIC insures bank deposits up to $250,000 per depositor, per bank, per ownership category, while SIPC protects customers when a brokerage firm fails.
📈 In the real world
🏦 Mrs. Chen keeps $200,000 in a savings account at her bank and owns stocks at a brokerage firm. When her bank's affiliated brokerage unit sells her a mutual fund, the rep explains that the fund is not FDIC-insured even though it was bought inside her bank's branch. Deposits are FDIC territory; securities are not.
📌 Takeaways
- The Fed sets monetary policy and margin credit (Reg T); Treasury issues government debt; the IRS handles taxes
- Blue-sky laws (often based on the Uniform Securities Act) are state laws; NASAA is the association of state regulators
- FDIC: bank deposits up to $250,000 per depositor, per bank, per ownership category; it does not cover securities
📖 Terms in this lesson
Federal Reserve: The US central bank, which runs monetary policy and sets initial margin for securities credit through Regulation T.
State securities administrator: The state official who enforces that state's securities laws, including registering securities and agents sold or working there.
Blue-sky laws: State securities laws, many modeled on the Uniform Securities Act.
FDIC: The agency insuring bank deposits up to $250,000 per depositor, per insured bank, per ownership category; it does not insure securities.
✅ Test yourself
Which body sets the initial credit rules for buying securities on margin?
- The Treasury
- The Federal Reserve
- FINRA
- The SEC
Answer: B · The Federal Reserve
The Federal Reserve Board sets Regulation T, which governs broker-dealer credit for buying securities. FINRA adds maintenance rules, the SEC oversees markets generally, and the Treasury issues government debt.
What are 'blue-sky laws'?
- State securities laws
- Exchange listing standards
- FINRA advertising rules
- Federal tax rules for bonds
Answer: A · State securities laws
Blue-sky laws are state laws regulating securities offerings and the people who sell them; many follow the model Uniform Securities Act. They are not federal tax rules, exchange standards or FINRA rules.
A bank customer buys shares of a mutual fund at her bank's branch. How is the investment covered by the FDIC?
- Up to $250,000 per depositor and ownership category
- It is not covered by the FDIC at all
- Up to $500,000 including cash
- Only the first $100,000 of the fund shares
Answer: B · It is not covered by the FDIC at all
The FDIC insures deposits, not investment products, even when sold at an insured bank; mutual funds, stocks, bonds and annuities are uninsured. $250,000 is the deposit limit, and $500,000 is SIPC's limit for brokerage customers.
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