If a customer's claim exceeds SIPC coverage limits, they become what?

When a customer's claim exceeds the limits set by the Securities Investor Protection Corporation (SIPC), which is currently $500,000 with a maximum of $250,000 for cash claims, that customer is classified as a general creditor of the bankrupt broker/dealer.

In the event of a broker/dealer's failure, SIPC steps in to cover claims up to the specified limits. However, once a customer's claim surpasses these limits, SIPC can no longer provide further protection, placing the excess claim into the pool of unsecured claims related to the broker's bankruptcy proceedings. This means that the customer may recover some funds, but only after all secured and preferred creditors are paid, often leading to a significant loss for the claimant.

The other classifications, such as secured creditor or preferred creditor, apply to those whose claims are recognized with priority over general claims, which is not the case for customers exceeding SIPC limits. Additionally, being a member of SIPC is not a status that affects claims; rather, it is an organization that provides protection to investors against broker/dealer failures.