SIPC says Robinhood's 3% checking account not insured by them

Google BMoreland
Dec 14, 2018 19 Comments

Robinhood’s launch of checking accounts with 3% interest is a disaster

“Every Robinhood account is SIPC insured up to $250,000 in cash.”

To put this in perspective, Betterment’s cash-like option (the account consists of Treasuries) pays 2.09% and does not claim to be insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SPIC), a federally-mandated, member-funded non-profit.

But soon after news spread of this sweet deal, the SIPC perked up. It didn’t know anything about this, and its president and CEO viewed Robinhood’s claims as deeply problematic. This rounds out a tough week for Robinhood, which had a trading outage that left some users furious.

“I first found out about this when I received media calls at 12:06 p.m. yesterday,” said Stephen P. Harbeck, president and CEO of SIPC. “I issued my view of what the law is: that SIPC only protects monies that are deposited for the purposes of purchasing securities.”

The main issue, Harbeck told Yahoo Finance, is that SIPC’s statutes mandate it to protect only a certain kind of account, which he interprets as not including checking and savings accounts.

https://finance.yahoo.com/news/robinhood-launch-checking-accounts-3-211615271.html

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TOP 19 Comments
  • Uber XQXB30
    How did Robinhood fuck this up so badly.
    Dec 14, 2018 3
    • Citibank / Finance $$>RSU
      Desperation and incompetence. VCs are looking to get paid. Uber and Lyft ipos are prime examples. We’re close to the beginning of a major shit show.
      Dec 14, 2018
    • Intel / Sales LastMan
      I concur.. looking forward to the shit show .. it will be ugly
      Dec 14, 2018
    • Citibank / Finance $$>RSU
      I am long term but always painful short term. Shit shows are indiscriminate. Being financial and emotionally prepared helps but always painful.
      Dec 14, 2018
  • Amazon Mustafa
    Who uses Robin hood? Millennials? Poor people?
    Dec 14, 2018 3
    • Google / Data
      jamal

      Google Data

      BIO
      10yoe BI/DW/python
      jamalmore
      HFTs, to skim .0001$ off of every share you buy. It's kind of like going to whole foods - sure you get convenient access to all top of the line products (for free), you just don't get the best price
      Dec 14, 2018
    • Intel / Sales LastMan
      What the heck are u saying?
      Dec 14, 2018
    • Microsoft cnskksna
      Are you implying that every stock they sell/buy is sold at under price which costs the users a fraction of they submitted for sell/buy? Is there a fineprint about this?
      Dec 14, 2018
  • Google / Mgmt Lovedoo
    Worst case they may have to apply for a banking license as opposed to operate on their brokerage license. Alternately they can find a reinsurer who would be willing to fill in the SIPC role. Mastercard will cover liability for the debit cards. What’s gray is who covers the $$ in your account, if they plan to invest in AAA govt bonds, and there is a drop.
    Dec 14, 2018 2
    • Square Cnao75
      A banking license hasn’t been issued in 12 years so good luck with that.
      Dec 14, 2018
    • Google / Mgmt Lovedoo
      True. Maybe they can go the credit union route, or tie up with one. I am sure there is a solution to insure deposits
      Dec 15, 2018
  • Snapchat +1s
    Dec 14, 2018 0
  • VMware nononoy
    Dec 14, 2018 0
  • Microsoft qbys57
    https://www.bloomberg.com/news/articles/2018-12-14/sipc-says-it-has-serious-concerns-about-robinhood-s-new-product

    “I disagree with the statement that these funds are protected by SIPC,” Stephen Harbeck, president and chief executive officer of SIPC
    Dec 14, 2018 0
  • Microsoft Need
    What the hell is robinhood?
    Dec 14, 2018 2
    • Salesforce skfjtiqlxj
      Dressed in green, takes from the poor, gives to the rich. A little different than the story book version
      Dec 14, 2018
    • Facebook public2
      A slick UI over and apex trading account for people who are anti brokers.
      Dec 14, 2018
  • Bose JustMeHa
    I think this is deal breaker for their checkings account
    Dec 14, 2018 0
  • New bob_
    Doesn't Robinhood offer commission free trading? On the surface, it seems like a good product.
    Dec 14, 2018 0