Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

SIPC Says It Has Serious Concerns About Robinhood's New Product

bloomberg.com

Post reply on HN
Print view View original

31–40 of 322 posts

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#31

Post by wallawe »

caymanjim wrote: post #3

Another 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.

AirBnB and Uber are both examples of companies that were huge wins for customers/consumers. Just because they flout regulations which are often times outdated and unnecessary (re: protecting inefficient incumbents) doesn't mean they aren't doing what's good for the consumer.

I agree though that Robinhood is a different story with potentially harmful consequences for unsophisticated investors looking for a safe/easy investment.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#32

Post by Mtinie »

obeattie wrote: post #12

It'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…

AFAIK they haven't yet launched, it's not going to be until "early 2019". Not a defense of Robinhood, but their lack of (apparent) SIPC protections today do not necessarily imply they will be missing when they formally launch with actual customer deposits.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#33

Post by saalweachter »

obeattie wrote: post #12

It'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…

They almost have the UI changes to the phone app done, which is the hard part. What's a little paperwork?

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#34

Post by all_blue_chucks »

hn_throwaway_99 wrote: post #13

Through 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 ref…

Short term investment grade debt has a default rate of near-zero and pays more than 3%. See for yourself:

https://investor.vanguard.com/etf/profile/VCSH

It is entirely possible for them to safely promise a 3% account under these conditions. This is not at all like the financial crisis. It's just wrapping an investment grade bond fund in a bank account interface.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#35

Post by mrfredward »

ajross wrote: post #20
mrfredward wrote: post #8

Normally 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…

I did some quick research. Discover has a money market account for 1.9% APR that is FDIC insured and has a debit card.

Money market accounts have been around a while. Is Robinhood's account different because they are subsidizing it to hit 3% APR?

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#36

Post by toomuchtodo »

objektif wrote: post #26
toomuchtodo wrote: post #15

Earlier quoted context omitted.

Move fast towards to IPO exit, break users' personal finances. This is what happens when your growth team runs up against competent regulators.

Growth team = MBAs is that right?

Could just as easily be amoral technologists. Lack of ethics doesn’t discriminate.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#37

Post by pjc50 »

luckydata wrote: post #29

I don't understand the infatuation silicon valley has of Robinhood. Take almost every possible bad idea about personal finance and put them in an app, you get Robinhood. The business model is also suspect, I think there's a little more that hasn't been disclosed and I suspect the chase for cash started when the crypto currency fad started deflating in a hurry. I wonder if Robinhood is hiding something bigger under th…

> almost every possible bad idea about personal finance and put them in an app, you get Robinhood

That sounds extremely profitable, so long as you stay ahead of the law - just like Robin Hood, in fact. But in this case it's not taking money from the rich ...

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#38

Post by kinkrtyavimoodh »

luckydata wrote: post #29

I don't understand the infatuation silicon valley has of Robinhood. Take almost every possible bad idea about personal finance and put them in an app, you get Robinhood. The business model is also suspect, I think there's a little more that hasn't been disclosed and I suspect the chase for cash started when the crypto currency fad started deflating in a hurry. I wonder if Robinhood is hiding something bigger under th…

> bad idea about personal finance

Such as?

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#40

Post by devman0 »

300bps wrote: post #27
DevX101 wrote: post #11

> “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?

You can open an Ameritrade or any other brokerage account and deposit money into the account with no intention of purchasing securities. There is no dispute that the SIPC would cover your account in that instance. The only thing that has changed here is Robinhood is explicitly marketing their brokerage account as being able to be used as a savings account without any need to invest in securities. It’s not black and w…

I'm not sure how Ameritrade works, but the other brokers I've used (Fidelity, Schwab, and Vanguard) you either have an 'uninvested' position where your cash is parked (generally a federal money market fund) or bank sweep that is FDIC insured. They never actually hold cash for you it is either in a money market or a bank sweep.
Post reply on HN