Background
We did a thread on the Robinhood announcement yesterday due to some issues with Robinhood referral spam and the sheer number of threads that were being posted. Given comments from the head of the SIPC, an update thread seems prudent (even bearing in mind that the existence of a thread is not an endorsement).
Update
Robinhood claims that accounts will be covered by the SIPC (rather than the FDIC which insures bank deposits in the US). However, this claim now appears to be dubious given comments by the director of the SIPC:
"I disagree with the statement that these funds are protected by SIPC," Stephen Harbeck, president and chief executive officer of SIPC, said in an interview Friday. "Had [Robinhood] called us, I would have told them what I just told you in that I have serious concerns about this. This has gigantic ramifications for the banking industry."
Current media coverage of this issue tends to support the idea that Robinhood checking funds would not qualify for SIPC coverage:
- Robinhood's new checking account runs into legal trouble
- SIPC chief raises concerns to SEC about Robinhood's free checking accounts
- Robinhood's New 3% Checking Account Continues to Raise Questions
- SIPC Head Has Concerns About Robinhood's Checking and Savings Products
- Robinhood checking and savings products are not insured, SIPC says
Update #2: "we're revamping our marketing materials"
[...] However, we realize the announcement may have caused some confusion.
As a licensed broker-dealer, we’re highly regulated and take clear communication very seriously. We plan to work closely with regulators as we prepare to launch our cash management program, and we’re revamping our marketing materials, including the name. [...]
Note: Just so there is no additional confusion, "cash management" does not generally imply the lack of FDIC insurance. For example, the Cash Management Account offerings from both Fidelity and Merrill Lynch are FDIC insured. (There may be counter-examples, but we're not aware of any notable ones.)
We will try to update this thread if there are further major developments.
Please do not post a referral link or hint about referrals in this thread or you will be banned. We want to keep the subreddit free of spam and advice given for the wrong reason (i.e., self-benefit).
Submitted December 14, 2018 at 05:25PM by PersonalFinanceMods https://ift.tt/2SN9UET
