SIPC Insurance

[VAer]

For FDIC, I understand that the money could be lost  (e.g.  if a bank lends out a large portion of loan and could not get the money back, then the bank could go bankruptcy ), that is why customers need FDIC insurance.

But for stocks, how can stock be lost? When customer buys stock, and the stock just stays on customer's account. Brokerage firm does not lend out the stock to other people, correct? Even if brokerage firm goes bankruptcy, the stock should still be there, customer can just transfer stock to another brokerage firm. Why we need SIPC insurance?

The reason I am asking: is SIPC insurance really important? If yes, why? What if someone has multiple millions dollars of stock? Should he/she opens multiple brokerage accounts and keep less than $500k on each account (considering the SIPC insurance limit)?

Thanks.

[NCperson]

suggest reading this

https://www.sipc.org/for-investors/what-sipc-protects

what happens if the brokerage firm 'cooks the books' and sells your stock without your knowledge, but gives you a statement saying that the stock is really there?  THAT is where SIPC comes into play.  

Rather than opening up multiple accounts, go with a reputable firm (large, well known), that reputation is worth more than the SIPC insurance in my view.