In the upcoming holiday period, our newsletter publication will take a break and return in the week of January 7th, 2019.
We thank everyone for your trust, support and continuous help to our service. We wish you happy holidays and a very successful 2019!
Robinhood’s ‘Revolution’ Or Gimmick
Online brokerage Robinhood made a headline last week by announcing that it now offers checking and savings accounts that pay 3% annual interest to its customers. However, amid criticism from regulators and peers, it quickly backtracked and now states that it’s planning to ‘rebrand’ & relaunch the program.
Unfortunately (or fortunately for Robinhood), it was reported that this news alone has attracted over 600k new user signups.
At issue is that regulators are pointing out that this is not a conventional checking and savings offering from a real bank that has FDIC (Federal Deposit Insurance Corporation) insurance of up to $250,000 cash amount. This is simply a brokerage account that has insurance from SIPC (Securities Investor Protection Corporation). SIPC is an industry formed consortium while FDIC is from the federal government. The cash in a brokerage account, by definition, can be used for some purpose (such as lent out) by the broker. This means it’s less safer than a checking/savings account offered by a bank.
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