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> What makes this different? The intent. The SIPC will insure the funds if their purpose is to be exchanged for securities as some point.

notyourday 8y ago
This is weaseling out. The reason why people move cash into a brokerage account is because they intend to invest it at some point in future. If I intend to invest my coverage limit amount at some point in future but for now I'm using it as a place to dump my cash into and use it as a DDA, i absolutely fall under that umbrella. The reason why SIPC is having a fit is because someone who is supposed to be fleecing the retail clients is also planning on fleecing those those business is fleecing retail clients.
- ineedasername 8y ago
  The reason why people move cash into a brokerage account is because they intend to invest it at some point in future. This is the problem. Robinhood is marketing the product to people who have no intention of investing. You're taking a very conspiracy-theory view of the situation. If there were an agenda to maliciously over-regulate Robinhood, it could have been executed well before this point. The fact is that Robinhood was trying to introduce a novel product that doesn't neatly fall into pre-existing categories that benefit from insurance protection. (It's great they're trying this-- I hope it succeeds!) But they appear to have done this without contacting SIPC. Had they done so up front (as they're now doing) they probably could have massaged the marketing and legal details appropriately (as I expect they will do).
adrr 8y ago
Funds are invested to be able to get that 3% return. It’s like the sweep accounts for your brokerage are put into money markets to get higher interest. Cash isn’t just sitting there.
- dwild 8y ago
  Disclaimer: this is how I understands all this, I could be wrong though > Funds are invested to be able to get that 3% return. If they are, then they are not insured either. SIPC doesn't insure bad investment decision, thus if the 3% return fail, you would lose money. The SIPC protect the cash that is stored there which you are going to invest at some point. Let say you put 1000$ there and you invest 200$, it's alright, theses 800$ are protected whatever happens, but if you put 1000$ there but wasn't planning to invest anything, then it's not alright and this is the issue. It's mostly a semantic point, but that semantic is what make it manageable for the SIPC.
  - adrr 8y ago
    SIPC covers things like missing investments If Robinhood was undercapitalized and used money in the sweep accounts to cover the liabilities of bad investments to keep themselves in business.

notyourday 8y ago

This is weaseling out. The reason why people move cash into a brokerage account is because they intend to invest it at some point in future. If I intend to invest my coverage limit amount at some point in future but for now I'm using it as a place to dump my cash into and use it as a DDA, i absolutely fall under that umbrella. The reason why SIPC is having a fit is because someone who is supposed to be fleecing the retail clients is also planning on fleecing those those business is fleecing retail clients.

ineedasername 8y ago
The reason why people move cash into a brokerage account is because they intend to invest it at some point in future. This is the problem. Robinhood is marketing the product to people who have no intention of investing. You're taking a very conspiracy-theory view of the situation. If there were an agenda to maliciously over-regulate Robinhood, it could have been executed well before this point. The fact is that Robinhood was trying to introduce a novel product that doesn't neatly fall into pre-existing categories that benefit from insurance protection. (It's great they're trying this-- I hope it succeeds!) But they appear to have done this without contacting SIPC. Had they done so up front (as they're now doing) they probably could have massaged the marketing and legal details appropriately (as I expect they will do).

adrr 8y ago

Funds are invested to be able to get that 3% return. It’s like the sweep accounts for your brokerage are put into money markets to get higher interest. Cash isn’t just sitting there.

dwild 8y ago
Disclaimer: this is how I understands all this, I could be wrong though > Funds are invested to be able to get that 3% return. If they are, then they are not insured either. SIPC doesn't insure bad investment decision, thus if the 3% return fail, you would lose money. The SIPC protect the cash that is stored there which you are going to invest at some point. Let say you put 1000$ there and you invest 200$, it's alright, theses 800$ are protected whatever happens, but if you put 1000$ there but wasn't planning to invest anything, then it's not alright and this is the issue. It's mostly a semantic point, but that semantic is what make it manageable for the SIPC.
- adrr 8y ago
  SIPC covers things like missing investments If Robinhood was undercapitalized and used money in the sweep accounts to cover the liabilities of bad investments to keep themselves in business.