SIPC Concerns About Robinhood
It seems the splash made by free brokerage Robinhood last week by announcing 3% yields on checking and savings accounts has backfired. Forbes.com writes "SIPC Head Has Concerns About Robinhood’s Checking and Savings Products," which tells us, "Robinhood, a Menlo Park startup that has built its business offering free stock and cryptocurrency trades, recently announced new checking and savings-account products that pay 3% interest. The accounts are not FDIC insured. 'Cash in Robinhood Checking & Savings is insured up to $250,000 by SIPC,' a Robinhood spokesperson said in an email. But now the head of SIPC (Securities Investor Protection Corporation) says Robinhood is misinterpreting the protection it provides and that the startup failed to contact anyone at SIPC before releasing the new products." It adds, "Big brokerages that don't have banks, like Fidelity, also put customers' cash in interest-bearing accounts. But there's an important difference. Any money in your Fidelity brokerage account that you don't spend on securities like mutual funds or stocks will get swept into a money market account, which is a security. And the customer can choose between different money market funds. In this instance, Fidelity is following the spirit of the SIPC rule because it's putting the customer's money in a security, Harbeck explains.... Since SIPC isn't a regulator, its next step was to alert the regulators. '`I called our colleagues in trading and markets at the SEC, and I asked them to look into it,' Harbeck says. 'I'm sure they'll be doing that today.'" See also, CNBC's "Bank analyst rips Robinhood's new savings account plan, says regulators may get involved".
