SIPC Says It Has Serious Concerns About Robinhood's New Product
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Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#2I had a bit of interest on this when I first read about it, but was a bit skeptical then... I wouldn't touch this at all now with no guarantee that the deposits are insured.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#3Another example of startup hubris. Much like Uber and AirBnB got started (and in many cases, continue to operate) by flouting regulations, Robinhood thinks they're being innovative, when they'll really just hoping they can get big enough that they can buy or bully their way past the rules. At least long enough to get acquired.
It might work, but in this case, the people most likely to get screwed are the customers.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#4"“The statute that we administer says that we protect money with a brokerage firm that is used for the purchase of securities,” he added. “On Robinhood’s help page, it says that you don’t need to invest to use Robinhood checking and savings, that statement is wrong. If you deposit money for any other purpose, it is not protected.”" -- If they are using the deposit to then behind the scenes purchase a security directly, why wouldn't that be protected??
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#5Irrespective of if it is protected or not, surely there is some other catch? Normally impossibly high interest rates are time-limited or balance-limited. I think somebody mentioned this is a variable rate so presumably this is a marketing ploy and they'll put it down to 1.5% in 6 months.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#6When I saw the original announcement I thought to myself, that's a high interest rate, but it sounds to good to be true; I probably ought to stay away as I'd rather play things safe with my money.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#7“Had they called us...”
ffs - they didn’t even do the most basic due diligence on this?
This is not just an indicator that this particular product might be in trouble, this is another order of magnitude kind of incompetence that makes me wonder why anyone would trust this company at all.
Wouldn’t you have to feel like the probability they end up with a major security issue, funding issue, executive behavior issue, etc., are all magnified by this knowledge?
I mean really, this is a staggering thing to read. I don’t think there could be hyperbole in this, it’s just incredible hubris-based incompetence.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#8Normally brokerage accounts fall under the SIPC and bank accounts under the FDIC.
Robinhood thinks their checking account should fall under the SIPC...so is their bank account not a bank account? What am I missing?
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#9Another example of startup hubris. Much like Uber and AirBnB got started (and in many cases, continue to operate) by flouting regulations, Robinhood thinks they're being innovative, when they'll really just hoping they can get big enough that they can buy or bully their way past the rules. At least long enough to get acquired. It might work, but in this case, the people most likely to get screwed are the customers.
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Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#10"“The statute that we administer says that we protect money with a brokerage firm that is used for the purchase of securities,” he added. “On Robinhood’s help page, it says that you don’t need to invest to use Robinhood checking and savings, that statement is wrong. If you deposit money for any other purpose, it is not protected.”" -- If they are using the deposit to then behind the scenes purchase a security directl…
The SIPC insures and protects consumers, not the brokerage/investment bank itself. So if the funds are deposited by the customer in order to buy securities on behalf of the customer, then it's protected. If the funds are deposited by the customer in order to pay out interest, and the only one with the intention of investing that money into securities is the brokerage itself, then it's not protected.