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