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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

#301

Post by freeone3000 »

metafedora wrote: post #156
CydeWeys wrote: post #10

Earlier quoted context omitted.

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.

The problem with this is that Robinhood claims you can have a Robinhood "Checking and Savings" account and not buy stocks with it - and the SIPC is saying no, you actually do need to intent to buy and sell stocks with it and to use this account as a source of funding in order for it to be insured.

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

#302

Post by freeone3000 »

ohiovr wrote: post #281

They’ll give you 3% on savings by investing it in treasuries and pocketing the difference. The 20 year is now 3.03% and interest rates are rising Its the Theranos of finance!

Theranos's product didn't work. This product may be a bad deal or a good deal, but it's going to deliver what they promise. T-bills are illiquid if you want the gains. They're promising liquidity in exchange for a cut of the gains. Sounds reasonable, at least in theory.

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

#303

Post by thesausageking »

Swquenzer wrote: post #58
kinkrtyavimoodh wrote: post #38

Earlier quoted context omitted.

> bad idea about personal finance Such as?

Idk why this was downvoted, but I would like to know as well. I feel like a know a decent amount about personal finance, and Robinhood is amazing. Primarily, I can trade stocks with zero fees. The app is easy to use. It's not outwardly pushing me to make bad decisions as far as I can tell. If there are issues on the business side, that's a separate concern(?)

There's no such thing as "zero fees". Robinhood is making money by giving your trade orders to hedge funds who then front run them, so you end up paying for it by getting worse prices for your trades.

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

#304

Post by jkqwzsoo »

te0x wrote: post #299
jkqwzsoo wrote: post #218

Earlier quoted context omitted.

But you could buy those same ETFs with the same $0 fee on Vanguard (or Fidelity and a couple other platforms now), a substantially more established financial firm, and you could keep your residual cash in well established money market funds like VMMXX, also with $0 fee, or VMSXX for tax-exempt growth. The only real reason to have money in RH, IMO, is if you're gambling with <$1000 on penny stocks and options-cum-lott…

I buy Vanguard ETFs and many other index funds (that Vanguard doesn't offer) on Robinhood. The user interface is 100x better, and why wouldn't I want to keep it all in 1 place? They just need an IRA product and most people would be set.

What index funds doesn't Vanguard offer?

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

#305

Post by kartickv »

prepend wrote: post #200
BurningFrog wrote: post #93

Earlier quoted context omitted.

> Iceland refused to make depositors whole As I recall it, the 340,000 people of Iceland had no chance in hell of covering the enormous amounts even if they wanted to.

That’s what I thought was funny. How did Iceland’s financial laws allow a local bank to take deposits so big the entire country can’t insure it. Not to mention the criminal element.

> How did Iceland’s financial laws allow a local bank to take deposits so big the entire country can’t insure it.

Why not? Shouldn't Icelandic law protect Icelandic residents?

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

#306

Post by pertymcpert »

city41 wrote: post #175
jartelt wrote: post #66

Earlier quoted context omitted.

The vast majority of people should just be maxing out their 401k and investing in index funds. They shouldn't be using Robinhood to buy individual stocks, buy cryptocurrency, or do options trading.

You can buy index funds in Robinhood. That's how I use it. Just a simple, to the point, interface for buying and holding index funds.

How do you do that?

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

#307

Post by cge »

snowwrestler wrote: post #255
ineedasername wrote: post #248

Earlier quoted context omitted.

You seem to be indicating that SIPC wouldn't protect the liquid (cash) assets in the account, only reunite you with your stocks/bonds/etc. Based on the SIPC site [0] this is incorrect, and they get you your cash as well: " SIPC works to restore to customers their securities and cash that are in their accounts when the brokerage firm liquidation begins" [0] https://www.sipc.org/for-investors/what-sipc-protects

This is correct but most people don't carry a lot of cash in their brokerage account for very long. They either use it to acquire securities, or they move it out to a real bank account. So SIPC is not equipped, financially or logistically, to act like the FDIC. Incidentally, here is a really good article about what happens when the FDIC takes over a bank: https://www.npr.org/templates/story/story.php?storyId=102384..…

>This is correct but most people don't carry a lot of cash in their brokerage account for very long. They either use it to acquire securities, or they move it out to a real bank account. So SIPC is not equipped, financially or logistically, to act like the FDIC.

My understanding is that:

- "Cash" in brokerage accounts is usually actually some form of investment, and is usually listed as such (eg, as a deposit, money market fund, etc). The SIPC protects the holding of the investment, not the value of the investment, so if the fund goes bad, there is no protection.

- Cash in brokerage accounts is cash, and is not very common. It isn't going to make any interest, because it's not being invested by either the account holder or the brokerage, unlike fractional reserve banking. The SIPC protects this, but that's because it shouldn't have been at risk anyway.

The Robinhood account is thus confusing. If it is offering interest, then it's not cash, but a cash investment, and the actual value of the investment, which is what the clients would actually care about, isn't protected at all.

Edit: it appears they've pulled the announcement. Reading into that apology, maybe it was some sort of sweep into FDIC-insured bank accounts? But if so, how could that possibly offer 3% return?

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

#308

Post by blub »

vamos_davai wrote: post #235
TeMPOraL wrote: post #105

Earlier quoted context omitted.

> AirBnB and Uber are both examples of companies that were huge wins for customers/consumers. And for its shareholders, so is a factory dumping heavy metals to the nearby river. And for its customers, so is a slave plantation. You judge businesses by the treatment of all participants of an economic activity, not just the ones giving and receiving money. Uber and AirBnB are examples of companies that shit on society a…

I don't think AirBnB nor Uber has caused any physical harm to the surrounding communities.

It should be blindingly obvious that the parent post meant social / economic harm.

Unless one doesn't want to notice, that is.

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

#309

Post by ohiovr »

freeone3000 wrote: post #302
ohiovr wrote: post #281

They’ll give you 3% on savings by investing it in treasuries and pocketing the difference. The 20 year is now 3.03% and interest rates are rising Its the Theranos of finance!

Theranos's product didn't work. This product may be a bad deal or a good deal, but it's going to deliver what they promise. T-bills are illiquid if you want the gains. They're promising liquidity in exchange for a cut of the gains. Sounds reasonable, at least in theory.

You see, if Treasury interest rates rise, the value of existing treasuries from a lower interest rate fall. If you have to wait 20 years to get whole on the deal then it's effectively illiquid. But if you have to liquidate, then you must lose prinicple. Its a problem ongoing right now in the bond market.

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

#310

Post by darkerside »

mynameisvlad wrote: post #280
darkerside wrote: post #274

Earlier quoted context omitted.

You really think the president and CEO of the SIPC is a... freaking clown?? Sorry if that tone is harsh, but that statement appears completely ludicrous on its face to me. Can you provide a little context on why you would trust startup lawyers over the chief executive of a major government organization?

Nobody said a "freaking clown" or anywhere near that. The higher up you are at a company or organization, the less visibility you have into the day to day operations. What OP is saying is simply that the CEO of SIPC may not be informed in the discussions that already happened with Robinhood. Simply put, Robinhood has far more at risk than the SIPC by launching without SIPC insurance. The banking industry is heavily r…

It's more likely than the CEO of this organization making an uninformed public statement. Doing so is indeed the behavior of a clown. But I guess we'll see.

Edit: We don't even have to wait! SMH...

https://www.google.com/amp/s/techcrunch.com/2018/12/14/robin...

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