I bet the idea is to use the deposits to fund margin lending to offer 3% interest rate. I remember the rate was like $10/m for $2000 margin which is 6% per year. If it’s funding margin lending would it count as empty brokerage account to get insured?
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
#152It's Bloomberg reporting so they probably got it completely backwards, or made it up, or misunderstood what was told to them. Not saying they're right or wrong, i'm saying Bloomberg is a very unreliable news source, especially in tech.
I think it's worth reporting if the president and chief executive officer of SIPC says "I disagree with the statement that these funds are protected by SIPC".
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#153> “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?
Probably because someone took "ask for forgiveness, not permission" a bit too far.
This works in certain industries (e.g. Uber), but not in others, especially heavily regulated ones.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#154This is extremely concerning:
>> “I disagree with the statement that these funds are protected by SIPC,” Stephen Harbeck, president and chief executive officer of SIPC
As a result, I will not be signing up for Robinhood, that's for sure. I get the sense, It's not the place to park your money, if you're just trying to save up without investing.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#155Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#156"“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.
Isn't Robinhood's Checking & Savings service about the same as non-invested cash in an E*Trade account? That would mean there are a lot of consumers assuming the same risk if they invest with the many brokerages covered by SIPC, since its impossible to not have cash floating around after you fund your account or take profits.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#157Earlier quoted context omitted.
This is an important distinction. When the money marketeer redeems a dollar for less than a dollar it "Breaks the Buck" [0]. Cowen's MM account IIRC was the first one to do that back during the 01 crash. [0] https://www.investopedia.com/terms/b/breaking-the-buck.asp
The rules around breaking the buck were significantly changed after 08. Funds can suspend transactions instead now.
As if not letting people out is better than letting them out at a haircut. Need to maintain the illusion of safety I suppose.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#158Earlier quoted context omitted.
Edited: Iceland isn't a member of the EU, so my comment didn't make any sense.
Iceland is not a member of the EU
Iceland is not a member-state in the EU but they have close economic and political ties. They are a part of the European Economic Area (EEA) and the European Free Trade Association (EFTA).
They once applied for membership after the financial crisis but it didn't go through; currently most citizens are opposed to the idea.
Becoming a full EU member would require them to accept the EU's fishing limitations, potentially hurting their economy. There are also other factors involved:
https://en.wikipedia.org/wiki/Iceland%E2%80%93European_Union...
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#159Earlier quoted context omitted.
I had a good laugh at this. I expect a certain level of professionalism from financial businesses, and this sort of fluff marketing / gamification makes my skin crawl... mostly because it tells you about the rest of the maturity of the organization if the product and marketing team is sending out this kind of amateur crap.
Just wait for really fun stuff, like the huge "Buy Stock" button with a tiny "Maybe later..." 8pt link below it. Or "Let us scan your photos and location and have AI generate a TOTALLY LIT suggested portfolio for you!" Or even better: "5 of your friends are currently pumping NVDA! Tap here to write a few naked puts!"
I can't wait until they bring in all the dark patterns from travel sites; "1,213 people currently considering this stock" or "act now; only 6MM shares left!"
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#160Robinhood strikes me as a complete financial amateur-ish company, trying to attract millennials that don't know better by branding themselves as a cool tech company.
I have been using Ameritrade for a while and was curious about their no fee platform so gave it a quick go. The graphs have no legends associated in the app. The spreads seems not up-to-date with official quotes, etc. I went back to Ameritrade as fast as possible.
They are the "go fast and break things" of finance. There is a good chance that this will not end well.