Hacker News Reader

Hacker News

Comment by russell_h | Hacker News Reader

Full thread

russell_h

Is it FDIC insured?

View on HN

They aren't part of FDIC but they have SIPC insurance

https://support.robinhood.com/hc/en-us/articles/360001469903

Is my money insured?

Your cash in Robinhood is insured up to $250,000 by the Securities Investor Protection Corporation (SIPC). SIPC protects cash deposits in your account in the unlikely event that Robinhood fails.

Up to what amount?

SIPC insurance covers your checking, savings and investments. Your cash and securities in Robinhood are protected up to a total of $500,000 by the SIPC, $250,000 of which can be in cash, the rest in securities. SIPC insurance provides protection for your cash balance and securities holdings if Robinhood fails financially, but does not cover investment losses due to declines in the value of securities themselves.

Is this different from bank insurance?

Similar to FDIC insurance, SIPC protects cash in your account if the financial firm fails. FDIC insurance covers deposits in FDIC-insured federal banks. SIPC insurance covers cash and securities at SIPC-member brokerage firms. Robinhood Securities, LLC is a member of SIPC. Additional information can be found at sipc.org.

Apparently, SIPC doesn't provide blanket coverage[1].

So no coverage against, i.e. fire, flood, robbery or embezzlement [2]. The first 3 may not be relevant with digital bank that doesn't handle cash, but the last one might be.

EDIT: I misread the second reference. apparently FDIC does not insure against theft or embezzlement, but according to the first link FDIC does provide blanket coverage unlike SPIC. it's still not clear to me what blanket coverage means in this instance.

[1] https://www.schwabmoneywise.com/public/moneywise/essentials/...

[2] https://www.fdic.gov/consumers/consumer/information/fdiciorn...

Where did you get the "So no coverage against, i.e. fire, flood, robbery or embezzlement" claim from? It isn't in [1] or [2] and contradicts this:

https://www.fool.com/investing/brokerage/2014/05/11/what-sip...

From your link:

>SIPC does not protect customer funds placed with a broker-dealer just to earn interest.

In this case, doesn't that mean the people who just use Robinhood has a checking / savings account aren't covered?

My understanding (which is limited, so someone please jump in if I'm wrong) is that SIPC does not protect against a decline in value of your assets.

I'm wondering:

First, whether Robin Hood is lending out deposits to margin traders. If not, what are they doing with the money? I don't think that they are, as the article implies, making > 3% on US treasuries.

Second, if that investment loses money, are those losses passed on to account holders? If not, someone must be insuring that investment. Who?

> SIPC does not protect against a decline in value of your assets.

Neither does FDIC, right? Still doesn't explain what FDIC "blanket" coverage offers that SPIC doesnt

No, and that is one of the reasons their rate is so high. To receive FDIC insurance from the government, FINRA and the SEC generally have much tighter restrictions on what they allow the banks to do with the deposits and what they force the bank to keep in capital reserves, both of which are a drag on interest rates.

No. It's SIPC insured.

[0]: https://support.robinhood.com/hc/en-us/articles/360001469903

It has to be by law.

Well no it doesn't and no it's not.

There was a mention of a partnership with Sutton bank based in Ohio. I’m sure that’s where the FDIC insurance comes from.

yes.

Why people attempt to answer a question when they don't have a clue is beyond me.

Reply on news.ycombinator.com