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"“The statute that we administer says that we protect money with a brokerage firm that is used for the purchase of securities,” he added. “On Robinhood’s help p
by neom 8y ago
"“The statute that we administer says that we protect money with a brokerage firm that is used for the purchase of securities,” he added. “On Robinhood’s help page, it says that you don’t need to invest to use Robinhood checking and savings, that statement is wrong. If you deposit money for any other purpose, it is not protected.”" -- If they are using the deposit to then behind the scenes purchase a security directly, why wouldn't that be protected??
- CydeWeys 8y agoThe SIPC insures and protects consumers, not the brokerage/investment bank itself. So if the funds are deposited by the customer in order to buy securities on behalf of the customer, then it's protected. If the funds are deposited by the customer in order to pay out interest, and the only one with the intention of investing that money into securities is the brokerage itself, then it's not protected.
- neom 8y agoGot it, thanks for that!
- metafedora 8y agoIsn't Robinhood's Checking & Savings service about the same as non-invested cash in an E*Trade account? That would mean there are a lot of consumers assuming the same risk if they invest with the many brokerages covered by SIPC, since its impossible to not have cash floating around after you fund your account or take profits.
- freeone3000 8y agoThe problem with this is that Robinhood claims you can have a Robinhood "Checking and Savings" account and not buy stocks with it - and the SIPC is saying no, you actually do need to intent to buy and sell stocks with it and to use this account as a source of funding in order for it to be insured.
- Xixi 8y agoSIPC doesn't protect from losses on investments, so they would not cover the (potential) losses on these securities.