SIPC

olmek7

I moved completely away from buying and managing my own wallet. I will now have all in ETF. I’m looking to make money off of it. The transactions are cheaper than on an exchange. If I die, I want it easy for wife or sons to get access and manage it. Brokerage has SIPC insurance.

Phuffu

SIPC is private insurance, not thru the gov like FDIC and many firms, like Fidelity, carry insurance in excess of SIPC limits

bro-v-wade

*SIPC Your spelling means... something else altogether.

Calloused_Mind

Robinhood has great fundamentals. The app itself is easy to use, making it i deal for beginners. Their options use is by far the cleanest and easiest to use. They offer 5% APY for your uninvested cash. Also offers the biggest Roth IRA match at 3%. Other top app brokers don’t offer. They are competitive and have been improving beating expectations. Robin Hood will be successful in the future. I believe it will be surpass expectations. As an investment opportunity it’s ideal. If one is afraid it will go bankrupt (which is a Ludacris assumption) Robinhood is a member of the Securities Investor Protection Corp. (SIPC). This means that any loss of an investor’s securities (e.g., stocks and bonds) and cash held by Robinhood is protected up to $500,000 in the event the firm fails or goes out of business. This includes up to $250,000 protection for cash holdings.

ENOTTY

Well SIPC doesn’t protect you against situations where the MMF has broken the buck. It’s rare and until 2008 it was unimaginable but it did happen at least twice in history.

grimrigger

Yea, but they have SIPC protection, which although different is kinda the same. A money market invests your money in a huge array of short term bonds(municipal, corporate, etc.). So even if your brokerage goes bankrupt, etc., you still own all those short term bonds. So unless all the thousands of short term bonds go tits up at exactly the same time, you are relatively safe. And if they do, it most likely means we are in a financial apocalypse and it doens't matter where your put your money, the US dollar has failed.

ZmicierGT

I have many accounts but mainly because in Europe they are insured for only €20k. Also for a similar reason (one of) I opened an account directly in US with the SIPC insurance.

anzetominsek

Depending on your location, your broker will usually be regulated and have an insurance scheme in place. This is (again, usually) further enhanced by asset segregation, which keeps your assets separated from the bank. I don't know the specifics of your scenario, but US Interactive Brokers customers (and a few others) have SIPC protection, which covers up to 500k. However, for example, if you were to live in Hungary, your insurance would be the Hungarian Investor Protection Fund, covering a maximum of 100k. The best bet would be to read your broker's T&C or simply forward them this post.

jabezwaters

Wrong actually, look up SIPC insurance.

gibbonwalker

Your life savings probably shouldn't be in a HYSA anyway though. And there is SIPC insurance. Though granted I don't know the particulars of how that compares to FDIC.

jakechance

The only major protection HYSA have over MM Mutual Funds and/or T-Bills\* is that FDIC protection is clearer and can be larger than SIPC depending how you title your accounts. T-Bills are majorly advantageous as the larger interest payment is also exempt from state income taxes! This is a good blog post explaining it [https://www.mymoneyblog.com/treasury-bond-vs.-bank-cd-rates-adjusting-for-state-and-local-income-taxes.html](https://www.mymoneyblog.com/treasury-bond-vs.-bank-cd-rates-adjusting-for-state-and-local-income-taxes.html) \* 4 week to 52 week instruments are technically Treasury Bills where as anything over that is a Treasury/Savings Bond. It hardly matters for you at this time but it can help when looking up information as there are different considerations for Bills vs. Bonds (e.g. Series I bond has an interest penalty if redeemed too early).

SirGlass

>Optimizing SIPC and other insurance coverage. Insurance against bankruptcy of the broker-dealer is on a per-registration/per-broker basis. So if you have very high portfolio value that is more than the $500k coverage limit of a single registration, it would make sense to have one account at one broker and another at another broker, and split your money so that both are 100% covered. Just to point out if a brokerage fails , unless the brokerage was doing something very illegal and committing fraud your investments don't disappear The broker cannot confiscate your investments and the brokers creditors cannot claim your investments. If hou have 10 million invested in an ETF or stocks or bonds or MF , those will just get transferred somewhere else, you have almost no risk of losing that, unless the brokerage was committing fraud At the major brokerages like fidelity , schwab, vangaurd there is just too many eyes were major fraud would be quickly discovered

PapaCharlie9

An options account *is* a brokerage account, so you are attributing a difference that doesn't exist There are pros vs. cons for separating brokerage accounts: PROS * Independent tracking of total portfolio value. If you are benchmarking portfolio A against the S&P 500, while B is just gambling money and you don't have a benchmark, it makes sense to separate them into different accounts, it will be easier to compare the performance of A against the benchmark. Mixing the two portfolios would distort the performance comparison. * Optimizing SIPC and other insurance coverage. Insurance against bankruptcy of the broker-dealer is on a per-registration/per-broker basis. So if you have very high portfolio value that is more than the $500k coverage limit of a single registration, it would make sense to have one account at one broker and another at another broker, and split your money so that both are 100% covered. * Your capital is concentrated at one broker, but another broker offers better options features, and it's too costly/impossible to do a whole account transfer. Or similar differences that would make having two accounts make sense. * You want to manage deposits differently. For example, you may have a main wealth account where your paycheck is desposite into an MMF checking account, while separately you have an options trading account that you don't want to use to pay bills. CONS * When you want all your wood behind one arrow, meaning, you want all your capital focused on options trading. This argues for only having one account. This is usually the case for people whose total net worth for investing purposes is less than $25k. * Funding is extra steps and extra time. If you need more money in the option account, getting that money deposited in takes time and effort that you wouldn't have to spend if you only had one account. * More administrative hassle. With two accounts (at different brokers), you get two sets of 1099-Bs at tax time that you have to manage and process. Same with other account paperwork. If you have two accounts at the same broker, some paperwork will be consolidated. Like you might only get one 1099-B but still get separate monthly statements. * Might miss out on perks. Some brokers and banks offer perks if your monthly average net balance exceeds some minimum amount. Splitting your capital between accounts at two different brokers makes it harder to reach that net balance level.

Optionyout

You have SIPC up to $500k for each type of registration. So if you have an individual and an IRA or joint acct it is $500k for each type. Additionally, if you own shares they are yours. It's not like they can steal your ownership in them.

Historical_Low4458

I can understand that. I also have different accounts across different brokerages, but that's because they each have their own purpose. That being said the major brokerages are all SIPC insured.

aluminumtelephone

Yup, I do exactly that. One thing to know is that it is not FDIC backed, instead SIPC backed.

6days1week

Make sure to familiarize yourself with SIPC “protection”. Unlike FDIC where the “I” stands for “insurance”, the “I” in SPIC does not. They refer to it as “protection” (not insurance) https://www.sec.gov/oiea/investor-alerts-and-bulletins/investor-bulletin-sipc-protection-part-1-sipc-basics

Aggressive-Donkey-10

COFYX has 79 stocks and is dogshit, 0.6% expense ratio, you can get a Fidelity sp500 for 0.00% ER, or VOO for 0.03% also it made 69% last 10 years, versus VOO 180%!!! Tell your HR dept, to get an SP500 ETF pronto or you will file complaints with SEC, FDIC, SIPC, and frickin NASA also find out how much you are paying in total fees for you 401K, as 1% costs you 35% of your lifetime returns, 2% like 53%, and 3% like 69%, some 401ks embed this much in fees , in layered fund fees, 12b-1 fees etc.

Ap3X_GunT3R

Short answer: No Long answer: Probably. Fidelity and Robinhood have similar offerings. I think the only difference stands out is when your account grows to significantly larger size. Ways Fidelity stands out to me above Robinhood: - offers “excess of SIPC coverage” to its customers - bonds, CDs, fixed income offerings - has better customer service - offers more investment options vehicles as your account sizes increase (accredited investor, IPO, stock offerings, etc) - better research tools Things like this start to impact your portfolio at larger sizes. (I’ve excluded Schwab due to lack of fractional share investing which I feel is crucial for any new investor and very important for all investors)

PublicCOO

No Public is not a bank, we are a FINRA registered broker-dealer and member of SIPC. The HYCA is an FDIC-eligible sweep program administered by our clearing firm, Apex Clearing. You can see the full disclosures [here](https://public.com/disclosures/high-yield-account) I’m intimately familiar with the Synapse issues so I can’t speak to those, but to say that this brokerage cash sweep product is very different from that model, with far less complexity and far less concentration of risk.

SafariMadam

If a brokerage goes bankrupt during a MOASS, SIPC insurance only covers your COST BASIS, not the current market value at the time of bankruptcy. Brokerages like Robinhood, Webull, etc turned the buy button off. Computershare never did. 🤙

cambiumkx

This is a real concern In the US, this is covered by SIPC, up to 500k per brokerage account.

wanderingmemory

If you’re in the US you have SIPC insurance and other developed markets will have their own versions of such too. The assets are supposed to be segregated.

Sracco

SIPC is not the same as FDIC and is not the same level of protection.

bmitc

ySIPCyea, I'm not understanding the downvotes either. I haven't ever really seen this spelled out like this, and like younsay, there are a lot of mechanisms that are very opaque. For example, it isn't clear hiw SIPC applies to invested securities. It isn't even clear why you would need insurance on securities, as the brokerage doesn't own them. The only thing I can think of are cases of complete fraud where the brokerage doesn't actually purchase the securities it said it did.

Valvador

I did read it. It's an interesting question trying to figure out when SIPC and when FDIC is involved with MMFs, considering having your money in an MMF it's constantly shuffling between banks and your brokerage doing daily trades/loads to each other, ETC. I don't have an answer to that because I don't know, but I'm genuinely curious about the mechanics because I would love to know which insurance covers what. The rest of the post is mostly saying "it requires an apocalypse for you to lose money in an MMF", which is kind of the similar condition for you to lose money in US Treasuries, and for FDIC to fail to pay you back in a bank failure. The general answer is "don't worry about it" but for those of us that like details I would love it if someone more familiar with the topic would explain the mechanics in more detail. It's crazy how many people just are blindly okay labeling things as safe without understanding them even a little bit.

Worf_Of_Wall_St

Related questions, while I can understand a brokerage losing my cash since they take risks with it and, how can they lose my shares of companies? Like what scenario requires me to rely on SIPC restore my shares of a company? I've been basically assuming that the worst case is I temporarily lose liquidity on my shares but there's enough redundant records that I own them that a brokerage failure doesn't mean my shares get taken away (and how would that even happen? Brokerage sells my shares to use the money for their own debt?)

Nineworld-and-realms

If you need to rely on SIPC you have bigger problems to worry about

telekaster57

Just FYI, many reputable brokerages carry extra insurance beyond the SIPC limits. Up to you to see if that gives you a degree of comfort or not.

BunnyBunny777

So SIPC only covers up to 500k. You’re ok with that ?

throwawaystocks1234

FDIC is not for brokerages. You should be looking at SIPC which covers up to $500k.

DodgeBeluga

If you are with one of the bigger outfits like Vanguard, Fidelity, Schwab, etc, if those brokerages fail and SIPC cannot help, then we probably have a major crisis like cannibals in the streets hunting for OP for lunch type of crisis.

BunnyBunny777

Sorry meant SIPC - edited

PapaCharlie9

A lot just go uninsured, as evidenced by the post mortem of the Silicon Valley Bank failture. Some broker/bank combos offer additional private insurance above the regulatory requirements. For example, Etrade covers an additional $1.9 million of uninvested cash. You get some for free just being a client with a high enough average daily balance and you may be able to buy more on in some cases. Finally, if all else fails, open several different accounts with different capacities: like an individual account, an IRA, a corporate account, a trust, etc., etc. Each different capacity gets the 500k/250k coverage separately. Also joint accounts get double the SIPC coverage.

Narrow_City1180

SIPC insurance is 500K for seccurities and 250K for cash. How do big accounts deal with such a low amount of insurance ?

Key-Mark4536

If your (OP’s) concern is the brokerage itself going under, you’re looking at the chosen [second and fourth largest](https://en.wikipedia.org/wiki/List_of_asset_management_firms#Largest_companies) asset managers in the world. Also [SIPC Insurance](https://www.sipc.org/for-investors/what-sipc-protects) protects up to $500,000 of investments in case something happens to the broker. 

Squezeplay

I've used fidelity, vanguard and robinhood, plus a few other brokerages like fidelity, schwab. The biggest issue with robinhood is the support. All the other brokerages have support numbers you can call and get someone on the line, but for robinhood they just have chat/email. They've been good at solving all my issues but it usually took them a few days. If you want to be able to get someone on the phone right away, its an issue. Otherwise they are all very similar and will probably come down to specific features you want, margin interest rates, personal preference on the UI. Vanguard probably has the worse UI and robinhood's seems to be love/hate. In terms of safety Robinhood is SIPC, it would have to be a completely fraudulent for you to lose anything if it went bankrupt, which is unlikely given its size and how many eyes have been on it from recent controversies.

MJinMN

I would at least consider that I believe RobinHood just agreed to buy a crypto exchange. Hopefully everything goes smoothly, but a lot of other crypto exchanges seem to end up bankrupt and/or liquidating. Assuming that your RobinHood money is in an SIPC insured account, you shouldn’t have any loss potential even if it implodes, but I could see a scenario where you are unable to access your money for a while as things get untangled. Personally I wouldn’t take the risk, particularly if the primary reason is that they have a cool app. A second thing to investigate is what rate they will pay you on un-invested cash. Vanguard pays a full market rate, I think around 5.1% now, many of these smaller firms will pay lower rates on cash and make money by investing it themselves. Overall, if you really don’t like the Vanguard app, I would encourage you to look at Fidelity instead.

greytoc

That's not really how it works. Assets at a broker is held in custody. It's not like a bank where bank deposits are part of the bank's balance sheet. When a broker fails - or even if the broker's holding company fails - the assets in the account are not impacted. So if you have 100 shares of ABC - you still have 100 shares of ABC. Normally - what happens in the incredibly rare instance that a brokerage fails - the accounts are either liquidated or another broker buys them and the accounts are transferred. Many times - SIPC doesn't even get involved. Also - most brokers carry Excess of SIPC insurance - so check the broker that you are interested in. For example - look at a recent major failure like FTX. This was a failure caused by fraud where execs were arrested and convicted. When FTX failed - their US brokerage business was insulated and FTX US brokerage accounts which were custodied at the clearing firm did not lose any money - unlike unregulated crypto assets and crypto accounts. When FTX liquidated and the clearing firm failed - there was an orderly process that allowed customers to withdraw or transfer their equity assets. Another example are the bank failures like First Republic. First Republic owned an investment advisory and broker-dealer subsidiary. Even before First Republic went into receivership - many investment advisor teams left and took their clients with them. And the brokerage business moved to JPMC as part of the liquidation.

jr1tn

If you are worried, yes. I have lost money twice in failed brokers. This was in accounts not covered by SIPC, specifically FCMs (futures commission merchants). However, I am less worried about the likes of Schwab, Fidelity etc. I do realize Lehman and Bear Stearns were also considered blue chip and did fail.

laurabel

Who cares, they are covered by the SIPC. Your bank can fail also, but if you have FDIC coverage you are fine. Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member [SIPC](https://www.sipc.org/)) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member [SIPC](https://www.sipc.org/)). 

MattieShoes

Brokerage stuff is generally not FDIC but SIPC insurance... I believe your brokerage's SIPC insurance is protecting you from the brokerage failing, just not on theoretical loss in value of a money fund. Which has happened before, but I don't know if it's happened since the 08 crisis... and rules were put in place to make it less likely since then.

Low_Artist_8618

For some accounts, yes. Some offer mobile check deposit, but I'm not aware of any that offer cash deposit capabilities. Some support Zelle or other money transfer platforms, but at the very least you can do a traditional ACH transfer between two bank accounts. Some or most also offer bill pay capabilities, which can be used to pay some bills, as well as credit cards (if you're able to use one responsibly in the case of an emergency). The specific ability to pay out of the account in an emergency will likely depend on the specific emergency situation. Ability to deposit cash, or get something like a cashiers check if needed are common reasons I've heard cited for people keeping their brick and mortar accounts, even if the majority of their money sits in an HYSA most of the time. Some people are fans of Fidelity and other brokerages' money market funds, which in some ways function similarly to savings accounts (high liquidity, similar yield/interest rate), but importantly differ in that they're not held at banks, and therefore don't have FDIC coverage. Most brokerage accounts have SIPC coverage, which has a different focus and limitations.

MattieShoes

Worth mentioning that money funds aren't FDIC insured. They're heavily regulated and may be covered under a broker's SIPC insurance though, so not a significant worry IMO.

McKoijion

2 Robinhood’s savings account pays more than most money market mutual funds and comes with FDIC insurance. 2. If you’re fine with SIPC insurance only, USFR and SGOV are the best cash equivalents. ETFs are inherently more tax efficient than mutual funds. 3. Vanguard charges less for ETFs than for the equivalent mutual funds because they are cheaper to administer. 4. The lowest cost funds are Fidelity’s Zero Funds. Those used to be cheapest funds overall, but now it’s cheaper to buy VTI at Robinhood. You have to pay the 0.03% expense ratio, but you get a 1-3% match. (Plus, you really don’t want to buy them in taxable accounts.) Mutual funds are obsolete in the ETF era.

greytoc

I am an active trader - and I can assure you that RH is not sophisticated enough for all experienced options traders. For one thing - RH doesn't offer portfolio margin. The low margin rates are meaningless to an experienced trader because many traders are borrowing via box spreads - which I am told RH doesn't support. Also - option writers hold their cash collateral in the form of treasuries or long box spreads in portfolio margin accounts. RH doesn't provide interest in their bank sweep account because RH doesn't consider the sweep as collateral to option writers. I have also heard that RH doesn't support index options. And RH doesn't offer futures products. RH may be fine for inexperienced active traders but it's not mature enough for more experienced options traders. That is why I state that it's a fine broker for buy and hold investors. RH has in the past tried to project themselves as a platform for traders - but it's never really been a good trading platform - certainly not for option traders. I have noticed that RH has tried to pivot to capture more long-term investors with some of their incentives and services. But then they go and do dumb stuff like providing access to overnight trading and do a marketing campaign around it. RH also used to have a free-to-use rebalancer - but I rarely see that mentioned and I no longer see it in their marketing materials or web site. That is why I believe that RH is an immature business - they don't seem to have a real product strategy. > PS: FDIC insurance is backed by the US government and guaranteed not to lose money. SIPC insurance is backed by the brokerages and only protects against theft/fraud. Please do not bend the truth. Your comments about FDIC and SIPC is not factually accurate. The reason why NCUA and FDIC exists is because of how depositories are structured. A depository such as a savings and loan, bank, credit union keeps loans and deposits on the balance sheet - that is the nature of how a bank operates. They take in deposits and they lend out loans. That is why the insurance is needed - because the risk on insolvency of a bank directly impacts a depositor. A money market fund however does not carry such risks. And neither does a brokerage - that is why SIPC works differently - a money market fund whose underlying assets are in US government obligations are backed by the full faith and credit of the US government. The bank sweep program offered by Rohinhood is not a novel concept - it's simply a cash deposit platform service from companies like Stonecastle, IntraFi, etc. I believe Robinhood uses IntraFi. You may it sound like it's the best way to keep an emergency fund - and that is 100% untrue. There are numerous ways to manage cash. And it's certainly not how I do it. Again - I don't have an issue with RH - their service is probably fine for many people. It's just not the right one for me. There are lots of brokers out there and they all compete for customers based on their services and delivery quality. Just because you like RH, it doesn't mean it's the right broker for someone else.

McKoijion

* For buy and hold investors, Robinhood does exactly the same thing as every other brokerage, but they have a 1-3% match. * For people looking for a simple credit card, they have a 3% cash back card, which is the highest rate I've ever seen. * For people just looking for a high yield savings account, Robinhood was the first to offer a 5% interest rate and have $2.25 million in FDIC insurance compared to the usual $250,000. Money market funds pay less and merely have SIPC insurance. * For active traders, Robinhood has the lowest margin rates, commission free options trading, and the lowest crypto spreads. It's the cheapest place to trade. * Robinhood keeps making improvements. They're adding tax lots, futures, index options (SPX), and are making a new desktop trading platform to compete against Thinkorswim. [They even hired former Thinkorswim employees to make it.](https://riabiz.com/a/2022/1/6/robinhood-gets-brilliant-upper-manager-and-a-spare-ceo-by-nabbing-td-ameritrades-ex-thinkorswim-top-exec-hopefully-to-throw-a-lifesaver-to-robinhoods-sinking-stock) PS: FDIC insurance is backed by the US government and guaranteed not to lose money. SIPC insurance is backed by the brokerages and only protects against theft/fraud. That's fine for stocks and bonds, but not great when you need a place to park cash for an emergency fund. I'm not too worried about the risk of loss in money market funds, but it's amazing that Robinhood pays money market rates with savings account protections. It's a very rare combination of high return and low risk.

doodaid

If you want to just hold money long-term, park it in a brokerage that gives you other perks. For example, I rolled an old 401k over to Merill, and I'm a BoA customer, and that put me in the rewards tier for a bunch of benefits. I never pay ATM fees, free checks, 75% bonus on credit card rewards (= 5.25% cash back in some buckets), etc. Chase, Wells Fargo, and probably a hole host of other banks have their own brokerages and perks. If you're just going to "buy and hold", then pretty much any reputable, SIPC insured broker will be the same.

Pastor_Dale

Also SIPC insured.

JustHereForTheBeer

FDIC is banking, not investments. At RH your uninvested cash is covered by FDIC. SIPC covers 500k if your broker goes bankrupt assuming a different financial firm does not buy the assets and accounts.

illuminati5770

SIPC insurance covers up to $500k per brokerage account.

LegitimateLength1916

IBKR is insured by the Securities Investor Protection Corporation (SIPC). SIPC coverage includes up to $500,000 in total protection, which includes a maximum of $250,000 for cash claims. What SIPC protects?: [https://www.sipc.org/for-investors/what-sipc-protects](https://www.sipc.org/for-investors/what-sipc-protects)

CluelessStick

I'm at work on VPN so it transfers to the US website. Here is the canadian website: [https://www.interactivebrokers.ca/en/accounts/broker.php](https://www.interactivebrokers.ca/en/accounts/broker.php) >Broker accounts at Interactive Brokers give global regulated brokerage companies the means to reduce their operational, brokerage and clearing costs while providing electronic market access worldwide with our professional white branded trading technology. on the link you gave with the requirements, you will see that the $10k minimum is Required Minimum Commissions for the first 8 months (if you dont spend 10k on commission paid, they'll keep the rest as maintenance fees). That's not even the money in your account for trading, its just the commisions paid up-front. I can confirm to you that in Canada there is no minimum account requirements for a client account at IBKR. >IBKR Canada, unlike IBKR US, is also more of a traditional bank that offers savings accounts. Not sure what you mean... you cannot open a savings account on ibkr, they just pay interest on your balance, that is available in the US as well. [https://www.interactivebrokers.com/en/accounts/fees/pricing-interest-rates.php](https://www.interactivebrokers.com/en/accounts/fees/pricing-interest-rates.php) (US website, inssured thru SIPC) [https://www.interactivebrokers.ca/en/accounts/fees/pricing-interest-rates.php](https://www.interactivebrokers.ca/en/accounts/fees/pricing-interest-rates.php) (canada website, they made an error and forgot to replace SIPC by CIPC, but they give a link to the CIPC at the bottom)

MJinMN

First, all brokerage accounts are segregated and aren't assets of the firm. Even in a bankruptcy, creditors have no claim on those assets. Finally, accounts at both Vanguard and Fidelity are covered by the SIPC, so you're not going to lose your investments even in the almost inconceivable event of a collapse of either firm. It's up to you obviously, I won't say any more.

mrnoonan81

I'm laughing because I keep doing the same damn thing. *SIPC

Complex-Menu-6082

I’m all good if they go under I’ll just get my money back since their SIPC insured

thenewredditguy99

By law, if Robinhood ever goes bust, the SIPC (Securities Investor Protection Corporation) is to arrange the transfer of all accounts belonging to the failed broker, to a different broker. Failing that, all accounts are liquidated and investors are either made whole by receipt of certificates detailing ownership of the lost stock, or a check for the market value of the shares. As for your second question, there should be no extra hurdles to jump over or extra fees to pay.

Z-Mobile

I’m losing the slightest amount money on trades, yes you and believe me my brother has made this consistently clear, and that’s partly why I’m like pushed into being contrarian here, because again, it’s not enough to quip over for me personally. Ultimately trading started as a hobby for me, a nice lucrative one but I haven’t seen fit to optimize the trading value especially if it comes at a trade of again, using a UI I personally enjoy. And as payment flow is something I have to potentially obsess over at work, I’m way less likely to concern myself with it after I clock out. As long as my Robinhood investments are insured, which they are with either or SIPC for an amount over which I’m investing, it’s not that much of a concern for me.

McKoijion

There’s also $50 million per account in excess-SIPC insurance. https://robinhood.com/us/en/support/articles/how-youre-protected/

andrewgvn

[https://robinhood.com/us/en/support/articles/deposit-sweep-program/](https://robinhood.com/us/en/support/articles/deposit-sweep-program/) Your uninvested money is put into partner banks. Your securities are with Robinhood. You have $2.25 million FDIC insurance and $500k SIPC insurance, they don't cancel each other out, they are separate.

Intermountain_west

Shares lent through Fully Paid Lending services do not receive SIPC insurance. Considering that lent shares are more-than-fully collateralized, does the lack of SIPC protections create *any* risk for the investor?

joeyjoejoeshabidooo

SIPC has made 99 percent of filers whole in its history. If you're sitting on over 250k in cash you'd open up a new account elsewhere. The likelyhood of what you're describing is nearly zero.

dh6636

Nope, no lockup period at all. Price appreciates and resets every month so if you don’t wait a full month, you get the cap gains, if you do wait, then you get the monthly divy, then rinse and repeat. It’s in a brokerage account so not FDIC, but your broker should be SIPC. Regardless, it’s an etf, not a stock so there’s no risk of bankruptcy (especially because underlying is US tbills). It’s the closest performance you can get to buying actual tbills without having to actually go through the process to purchase them. I think the SEC yield right now for it is around 5.25 or 5.3% vs the 3 month tbill trading around 5.35 or 5.4%.

joeyjoejoeshabidooo

What black swan event has caused a self directed brokerage account to lose its cash? Have you not heard of SIPC insurance?

greytoc

I am intimated familiar with how SIPC works. In the US - there has not been a broker that has gone into receivership in a really long time. And when a broker fails or becomes insolvent in the US - customer accounts are simply moved into another broker or the account closed and net liquidation value returned to the investor. You fail to grasp how brokers actually work in the US. Customer assets are not assets of the broker. In many other countries - it works in a similar manner. Maybe in your country - it doesn't work that way. But you haven't answered the most basic question that has been asked to you if you want an answer - what country are you in? Brokers are regulated financial entities and they cannot provide services unless they are authorized to provide those services in that country.

Recent_Pangolin256

SIPC (Securities Investor Protection Corporation) covers up to $500,000 per account holder, of which $250,000 can be used to cover losses due to broker insolvency, if your broker goes bankrupt, SIPC will work to recover investors' assets. In some cases, the insolvent broker may be liquidated and its assets sold to cover debts. During this process, your shares may be sold on the market... :) I'm in EU, it's the same here and everywhere else in the "west". I don't see what's strange about looking for a broker in a country that isn't implicated in semi-global conflicts.

greytoc

Geesh - I can't believe you are basing your comments on the failure of Community Bankers MMF. Money market funds have not worked that way in decades. It is the only fund other than the reserve fund in 2008 that has ever broken the buck. Rule 2a-7 would never allow SPAXX to lose value in the same way as you suggest. And the liquidity rules that were proposed and adopted last year reduce liquidity risks even more. The only recent time that there was a liquidity risk was during the Covid crisis - but all redemptions were met by every money market fund in the US because the Fed provided a temporary backstop liquidity facility. The number of money market funds that have failed in history in the US in 2. The number of banks that have failed in the US just in 2023 that entered FDIC receivership is 5. And as far as I know - no brokers have entered into SIPC receivership in years.

greytoc

The reason why FDIC insurance exists is because of how bank deposits get used by a bank and how it is part of a bank's balance sheet. It's not accurate to say that FDIC is better than SIPC because they solve different risks. You comment about money market funds makes zero sense - what kind of derivatives do you think play a role in the NAV of a money market fund. A money market's risk is primarily from liquidity - in the same way that a bank run can place a bank at risk.

mdatwood

Anyone doing something with crypto have been getting notices because the SEC is finally taking some action. Non-event for the rest of Robinhood. As far as regular investments: https://robinhood.com/us/en/support/articles/Account-protection-with-SIPC/

greytoc

A broker-dealer failure where the SIPC takes over is pretty rare. Normally, a failing brokerage would go through an orderly liquidation and transfer before the SIPC gets involved. For example - even when FTX failed due to fraud - the non-crypto assets were custodied at a separate broker-dealer called Embed Clearing. When Embed Cleared shutdown - assets were returned to customers or transfered - afaik - SIPC was not involved. The only open case at the SIPC at the moment is the Bernie Madoff case when has been ongoing for a few decades - [https://www.sipc.org/cases-and-claims/open-cases/bernard-l-madoff-investment-securities-llc/](https://www.sipc.org/cases-and-claims/open-cases/bernard-l-madoff-investment-securities-llc/) The last open case that I'm aware that was closed in 2022 was the Lehman case. That doesn't mean that brokers don't shutdown or merged/acquired - in 2023 - there were 169 brokers that were terminated.

slumper

I did this exact move. I’m not an active trader so figured I may as well get something out of it. Keep in mind SIPC insurance is 500k. All brokerages say they self insure in excess of that, but I’d be more comfortable keeping it under the 500k cap.

echoenchanter

Both Webull and Robinhood are pretty solid when it comes to security. They're legit, registered with the SEC and part of FINRA. Plus, they both offer SIPC insurance, which means your investments are protected up to $500,000, with $250,000 of that for cash claims. Now, when it comes to earning some extra income on your idle cash, Webull takes the lead. They offer 5.00% APY with no extra fees attached. On the other hand, with Robinhood, you gotta be a Robinhood Gold member to score that 5% annual percentage yield. Otherwise, you're stuck with 0.01% APY starting from May 2024 for non-Gold members. And here's the kicker: to get access to Robinhood Gold perks, you gotta cough up $50 a year or $5 a month. So, with Webull, you're getting a straightforward high yield on your cash without any extra costs.

AmbitiousEconomics

Can you name any time since SIPC was founded where anyone ever lost shares of publicly traded firms they were invested in, where direct registering would have saved them? Just one example. It's been like half a century surely if that were true there would be one example.

getdealtwit_2003

I personally questions RH’s seeming desperation for new money coming in. Even if it’s legit and they don’t have any trouble on the horizon, I’d imagine you’re going to lose way more than 1% over the time period due to either increased fees from RH gold or drag from more aggressive payment for order flow. This 1% bonus is not appearing from thin air—it is being generated either from fees or from less ideal pricing due to payment for order flow (I am aware that other brokers also use payment for order flow, I’m just saying that RH could be generating this money by giving customers less ideal pricing than they might find elsewhere, but payment for order flow is so opaque that I can’t imagine being able to know this for sure as a customer). People should also be aware of coverage limits from SIPC—that only covers you for $250k of cash/$500k of securities. Most people won’t have that problem, but OP suggests rolling over $500k of assets from vanguard—if the unimaginable happens and RH somehow fails on their obligations as a broker, OP could be well in excess for SIPC coverage. And with their past issues, I personally have no intention of ever doing business with them, especially at levels beyond SIPC coverage.

Squezeplay

They were offering 3% up until last month. I transferred and got the 3%. Bought stocks with it. They are SIPC so I consider it pretty locked in at this point unless they are a literal Madoff level scam.

domdip

SIPC limits are mostly relevant for cash. The securities themselves (except maybe weird stuff like fractional shares) are registered with the DTC and wouldn't typically be contested in the event of a brokerage failure

Alarmed_Reporter_642

I mean the SIPC limit is $500k. By moving on at a $265k cost basis I’m ensuring my capital is safe, and so are some of the gains in case of a failure. While brokerages are not a bank in terms of the reasons you stated the risk of failure always exists. The goal isn’t to stay under the SIPC limit in terms of value but just capital. I’m thinking of Fidelity due to fractional shares which VG doesn’t have beyond its index funds. Could help big time with DCA. Schwab also has a limit in terms of only 500 companies. IBKR is too confusing, and also charges a commission I believe. My monthly budget is usually $5k but I do have around 5 larger buys a year. Recent example would be $10k into Meta at $426 vs $410 bottom after market trading. Largest buy was $35k into Google in 2023. I move on when the value in the brokerage hits $300k.

SirGlass

>I’m opening up a new brokerage account because I want this one to be under the SIPC limit for as long as possible. I’ll rebalance of course but no more active buying. Also just add to a thought , opening up different brokerages isn't really an issue unless you want to use different features of the brokerage Like if you have a vangaurd brokerage that you invest in index funds but want to actively trade more well vangaurd is not really a great brokerage for active trading by all means open up another account at fidelity or schwab or IBRK or what ever brokerage fits your needs better But opening multipul brokerage accounts to stay under the SIPC limit is not really a thing, brokerages are not bank, they do not comigle assets. Customer assets cannot be used to cover company expenses or creditors cannot lay claim to customer assets

Able_Voice4158

Hi, I am Hikmat from BrokerChooser. Generally, both Webull and Robinhood are considered secure platforms. They're registered with the SEC and are members of FINRA. Both offer SIPC insurance, which protects securities up to $500,000 (including $250,000 for cash claims). Regarding cash management feature, on webull you can Earn 5.00% APY on your idle cash - no fees attached. In Robinhood only Robinhood Gold members can earn a 5% annual percentage yield. The non-Gold cash sweep program APY is 0.01% starting from May 2024. To get access to Gold’s premium features you have to pay a membership fee of **$50 annual or $5 monthly.** So, **Webull** offers straightforward high yield on idle cash without additional costs.

MotivatedSolid

Well Thank goodness that’s not how our financial system works. Beneficial ownership via street name ownership, SIPC insurance, and so much more prevent people from losing their accounts and investments. Quite frankly, a bankrupt brokerage firm would probably take the opportunity to sell the account custody to another brokerage firm. It’s a fantastic way to gain customers. Plus, the likes of Fidelity, Charles Schwab, or Morgan Stanley going under are slim to none.

llindstad

SIPC protects brokerage accounts up to 500.000 USD, if cash or assets are lost. That's number one. The CCP can confiscate any stocks, delist any company, and do exactly as it pleases, at all times. Which is has done numerous times in the past. Remember online tutoring? China does not allow foreign ownership of its stock market, technically. Instead, they list through shell companies in micro states, such as the Cayman Islands, offering indirect ownership in a company's subsidiary. Their "ADRs" in the US are essentially worthless, subject to the CCP's policies. That's not how we roll in the US. We have real courts, not kangaroo ones, with real laws that aren't rubber stamped. The SEC, CPFB et al have lost numerous cases over the years, which is a healthy sign.

notawildandcrazyguy

In general stocks are still represented by certificates but it's very rare that certificates are actually issued to individual shareholders. Instead your broker holds beneficial ownership of the stock on your behalf, as a fiduciary or custodian. The electronic records of your holdings is like the records of your money in the bank when you check your balance on a banking app. Proof of ownership would not be very difficult even if the broker went out of business. Others have noted the SIPC which is essentially federal insurance to cover your account in case the broker steals it or goes bankrupt. If you have a broker that anyone has heard of, you're safe.

No-Champion-2194

It is important to realize that a broker is not a bank. A bank takes your deposits, comingles them with other depositors, and lends them out to borrowers. If those loans fail, then the bank can become insolvent, and the money that customers deposited is lost and they are made whole by the FDIC. This is not how brokerages work. A broker maintains custody of your securities - those securities are not assets of the brokerage, and creditors of the broker have no claim on them. There is no solvency risk; if a brokerage fails, customers' securities still exist and can be transferred to another broker. SIPC insurance covers you in the case of embezzlement of securities from your account.

No-Champion-2194

This isn't correct. It is important to realize that a broker is not a bank. A bank takes your deposits, comingles them with other depositors, and lends them out to borrowers. If those loans fail, then the bank can become insolvent, and the money that customers deposited is lost and they are made whole by the FDIC. This is not how brokerages work. A broker maintains custody of your securities - those securities are not assets of the brokerage, and creditors of the broker have no claim on them. There is no solvency risk; if a brokerage fails, customers' securities still exist and can be transferred to another broker. SIPC insurance covers you in the case of embezzlement of securities from your account. Even in the case of Bernie Madoff, his brokerage customers did not lose any money or security. It was his investment clients who were scammed - the fund that he claimed was making double digit returns was just sitting in cash and he was falsifying the value of the fund.

semlowkey

I am from Canada, does the SIPC take care of my accounts too if I buy USA stocks and my Canadian broker goes bankrupt?

SamtenLhari3

The risk depends on whether your broker is Bernie Madoff or not. A reputable broker is required to maintain securities sufficient to cover customer positions. There is some small risk in the event of insolvency of a reputable broker that, due to recent trades, there is a shortfall of securities to cover positions. There is also SIPC insurance.

Stunning-Trade8869

Yes brokers can and will sell your securities in a force liquidation. That’s the reason SIPC exist.” SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash . Most customers of failed brokerage firms are protected when assets are missing from customer accounts.” https://www.sipc.org/for-investors/what-sipc-protects why do you think transfer agents don’t need to carry SIPC insurance? The security is in your name and only you can sell it.

WinningTocket

1. The shares are transferred to another broker via SIPC or similar if you're in another country. 2. Besides voting rights you can still print off stock certificates.

LonnieJaw748

You’re right, I forgot to specify if your broker is set up in any way as a bank that this is possible. It ifs a pure brokerage this is not possible and SIPC should protect the investor.

Darkstrike121

So the Securities Investor Protection Corporation (SIPC) arranges the transfer of the failed brokerage's accounts to a different securities brokerage firm. If the SIPC is unable to arrange the accounts' transfer, the failed firm is liquidated. I don't really know what the liquidation process would look like or what you end up with

Squezeplay

They give you the 3% right away and I bought stocks with it. So unless they're a literal Madoff level scam where they don't even buy the security, those stocks are in my name, or I guess technically my IRA's. If they are a straight up scam though everyone else's SIPC fees will bail us all out lol.

Romanticon

The money is still insured by SIPC. Even if Robinhood goes under, OP’s money, including the match up to that point, would be theirs.

Squezeplay

Yep, robinhood is SIPC and legit just like anyone else. If you just buy & hold you don't even have to log in for the 5 years. Free 3%, I don't know how they afford it, but its stupid to pass that free money up if you have any significant amount in an IRA.

GAULEM

> RH is fine and they are FDIC insured for more money than any of you have on here Robinhood is a brokerage, not a bank. FDIC does not apply to investments. If I recall correctly it might apply to your cash balance because they funnel that through several actual banks, but it seems unclear how the FDIC would untangle that. Your investments are covered by SIPC. Importantly, this does not protect from loss of value. What it protects you from is Robinhood literally losing your investments -- like if they stole your stocks to pay their own debts or something.

meshreplacer

I am exposed also lol 😂 way over SIPC coverage on my Schwab acct.

carbonpro

If only this is what SIPC did hahah

BaldFuck21

Hi i was told any losses on robinhood are insured by SIPC, i would like a refund please 🤓

ScottishTrader

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AccomplishedClub6

OP also doesn’t know the first thing about brokerages. They don’t need a bailout. If they go under your money is insured through SIPC for $500K per account. And that’s not even accounting for the fact that all your invested securities are held in a separate firewall outside of the brokerage’s legal reach. Meaning that if there is a cash shortage at say Fidelity, they aren’t allowed to touch your investment accounts and you don’t lose anything unless they break the law and start giving away your property. And no manager at Fidelity wants to go to jail for that, and even if they do, that’s when SIPC insurance kicks in. If they go bankrupt the ONLY thing you have to worry about is a few days of no access while everything is sorted out and your entire acct is transferred to another brokerage. And to play devils advocate, if they ever do need a bailout (this has nothing to do with the safety of your assets but it’s to preserve jobs and the too big to fail scenario)… in what world is the gov not going to bail out Fidelity???

TrainerCee

WellsTrade even though I know I’ll get slack but they have been heavily regulated the past few years. Their brokerage is very good I have a Schwab and Fidelity for comparison. Their brokerage is covered by SIPC and Lloyds. You can buy stock fractions starting at $10 and you can buy anything. You’re not limited to the S&P 500 like at Schwab it’s much cleaner and you avoid a lot of the junk stocks Fidelity likes to show you. In addition you can connect a Wells Fargo checking directly to it and you’ve got branches you can visit for help or to deposit into your checking or brokerage. Also I’ve never used a computer I’ve strictly used WellsTrade on my iPhone works great!