> “I disagree with the statement that these funds are protected by SIPC,” Stephen Harbeck, president and chief executive officer of SIPC
How the hell did this product get launched?
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
#12It's a bit jaw dropping that they've launched this without talking to the SIPC to check that they agree with the statement that they provide FDIC-like protection on these accounts. I wonder what happened here…
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#13Through all of this I can't help but be reminded of the 2008 financial crisis and think "this is not going to end well." One part of that crisis was Icelandic Banks making a huge push for savings all over the UK and other parts of Europe ("IceSave") with the promise of better interest rates. When it all went belly up those savers realized these Icelandic banks were not quite the same thing as UK banks and Iceland refused to make depositors whole.
If Robinhood had offered this as a normal bank with FDIC insurance I would have been impressed. For now it just seems they're just moving a little bit higher up the risk/reward curve and trying to pretend the risk is the same.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#14Irrespective 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.
Is there a "catch" when Uber rides cost less than the equivalent taxi ride, and in fact cost less money than the ride itself actually costs to provide?
It's just VC money being burnt to acquire more market share. The intent isn't to be profitable on the actual services provided, but to grow revenue and profit on an eventual IPO.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#15It's a bit jaw dropping that they've launched this without talking to the SIPC to check that they agree with the statement that they provide FDIC-like protection on these accounts. I wonder what happened here…
Move fast towards to IPO exit, break users' personal finances. This is what happens when your growth team runs up against competent regulators.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#16Normally 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?
Silicon Valley Startup Syndrome (SVSS): Ignore the law and the consequences in favor of Disruption & Growth. Meanwhile ignore any banking laws you can, because you want to sell customer data to HFT.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#17“I disagree with the statement that these funds are protected by SIPC,” Stephen Harbeck, president and chief executive officer of SIPC.
Not sure that leaves a lot of room for speculation - don’t sign up to use Robinhood as a savings account unless you are comfortable doing so without an FDIC level of guaranteed protection.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#18"“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…
SIPC doesn't protect from losses on investments, so they would not cover the (potential) losses on these securities.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#19Normally 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?
It's a brokerage account where you buy US Treasuries but also made liquid via a deal with Mastercard and branded as a chequing account
It's kinda smart - but i'm curious how they settle some of the backend with daily transactions moving in and out - if they're actually making bond purchases/sales with each transaction, for each customer each day, or for all customers each day etc.
edit: fwiw I think the entire premise of these new products and 3% paid (way over what treasury bonds pay) is as a loss leader to the gambling that is a lot of the "investing" done by Robinhood users. Must be temping to buy some Tesla options once you have a chequing account in the same app.
edit 2: their fine print:
> Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account.
so they're saying they might market it as a bank account, but it isn't
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#20Normally 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?
Presumably they structure it as an investment fund and not a bank account? I think "what am I missing?" is the whole point really: this thing doesn't fit within existing regulatory structures. It likely wouldn't qualify for FDIC insurance either.
The question then becomes whether this is a good kind of move-fast-and-break-things a la early Uber breaking into an over-regulated market, or if it's defeating an important protection that consumers need.