Fidelity Investments: Fdic Insurance And Your Money

The Federal Deposit Insurance Corporation (FDIC) is a US government agency that insures cash deposits at member banks, generally up to $250,000 per account. Fidelity CDs are insured by the FDIC, and all CDs are bought through FDIC-insured banking institutions, so consumers are protected for up to $250,000 in deposits at each individual bank. Fidelity also offers an FDIC-insured sweep program, which sweeps cash balances into an FDIC-insured interest-bearing account at one or more program banks.

Fidelity's FDIC-Insured Deposit Sweep Program

Through the Sweep Program, the cash balance in a customer's account is automatically swept into an interest-bearing FDIC-insured deposit sweep position. As FDIC insurance coverage is currently limited to $250,000 per qualified customer account per banking institution, Fidelity may use several banks to maximise coverage. This is referred to as the Program Bank List, with the first bank on the list being the Primary Program Bank.

The Money Market Mutual Fund Overflow, or Money Market Overflow, is a component of the Program that comes into effect when cash balances exceed FDIC insurance coverage limits or cannot be swept to a Program Bank due to a lack of capacity or unavailability of FDIC insurance. In this case, funds are swept into the Money Market Overflow, which is held in the Fidelity Government Money Market Fund. While funds in the Money Market Overflow are not FDIC-insured, they are the first to be used to settle any debits or withdrawals from the customer's account.

Fidelity automatically manages the movement of money between the bank and the customer's account and provides anytime access to view the amount of cash at each program bank. Each program bank will receive a maximum of $245,000 to ensure that any accrued interest is also eligible for FDIC insurance. Any deposits over this amount will be distributed across multiple available program banks.

It is important to note that investments at Fidelity are not typically covered by the FDIC. Instead, all Fidelity brokerage accounts are covered by the Securities Investor Protection Corporation (SIPC).

Brokered CDs

Fidelity offers investors brokered CDs, which are issued by banks for the customers of brokerage firms. These CDs are usually issued in large denominations, and the brokerage firm divides them into smaller denominations for resale to its customers. Because the deposits are obligations of the issuing bank, FDIC insurance applies.

FDIC insurance coverage limits

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that insures cash deposits at FDIC-member banks. The standard insurance amount is $250,000 per depositor, per FDIC-insured bank, for each account ownership category. This means that if you have deposits in different account categories at the same FDIC-insured bank, your insurance coverage may be more than $250,000, if all requirements are met.

For example, if you have a single ownership account at an FDIC-insured bank, and you have a joint ownership account with one or more people at the same bank, you will be insured for up to $250,000 for your single ownership account deposits and also insured separately for your ownership interest up to $250,000 for all of your joint ownership account deposits.

If you have a single ownership account in one FDIC-insured bank, and another single ownership account in a different FDIC-insured bank, you will be insured for up to $250,000 for your single account deposits at each FDIC-insured bank.

If you have two single ownership accounts (such as a checking account and a savings account) and an individual retirement account (IRA) at the same FDIC-insured bank, then you will be insured up to $250,000 for the combined balance of the funds in the two single ownership accounts. You will be separately insured up to $250,000 for the funds in the IRA, because IRAs are in a different account ownership category.

You can calculate your specific insurance coverage amount using the Electronic Deposit Insurance Estimator (EDIE), a calculator that is available on the FDIC’s website.

Fidelity offers investors brokered CDs, which are issued by banks for the customers of brokerage firms. These CDs are usually issued in large denominations and the brokerage firm divides them into smaller denominations for resale to its customers. Because the deposits are obligations of the issuing bank, and not the brokerage firm, FDIC insurance applies.

Fidelity also offers the FDIC-Insured Deposit Sweep Program, which sweeps uninvested cash balances into an FDIC-insured interest-bearing account at one or more program banks. Deposits swept into the program bank(s) are eligible for FDIC Insurance, subject to FDIC insurance coverage limits. If you have more than $245,000 of uninvested cash in your account, the Program will maximize your eligibility for FDIC insurance by allocating uninvested cash across multiple program banks. Assuming all the banks have available capacity, a customer could have up to $5 million of uninvested cash covered by FDIC insurance.

Securities Investor Protection Corporation (SIPC)

The Securities Investor Protection Corporation (SIPC) is a federally mandated, nonprofit, member-funded US government corporation. It was created under the Securities Investor Protection Act (SIPA) of 1970, which mandates membership of most US-registered broker-dealers.

SIPC is not a government agency or regulator of broker-dealers. Instead, it is an insurance that provides brokerage customers with up to $500,000 coverage for cash and securities held by the firm, with a limit of up to $250,000 for cash. It is designed to protect investors if their brokerage firm fails financially and was created to expedite the recovery and return of missing customer cash and assets during the liquidation of a failed investment firm.

SIPC has a Board of Directors that determines the policies that govern its operations. The board consists of seven members, all of whom serve three-year terms. Two members are appointed by the Secretary of the Treasury and the Federal Reserve Board, and the remaining five are appointed by the President, with the advice and consent of the Senate.

The SIPC Fund was established to cover the corporation's expenditures. The fund comes from members and interest from US government securities purchased by the SIPC. The corporation also maintains a $2.5 billion line of credit with the US Treasury.

SIPC has two primary roles in the event that a broker-dealer fails. First, it organizes the distribution of customer cash and securities to investors. Second, to the extent that a customer's cash and/or securities are unavailable, it can pay the customer up to $500,000 for missing equity, including up to $250,000 for missing cash.

SIPC does not cover loss in value. It does not insure the underlying value of the financial asset it protects, so investors bear the risk of the market. Investors also bear any losses of account value that exceed the current amount of SIPC protection.

Fidelity's government and U.S. Treasury money market funds

Fidelity offers three types of money market funds: government, prime, and municipal (or tax-exempt). The government money market fund, for example, generally invests at least 99.5% of its total assets in cash, U.S. government securities, and repurchase agreements. This type of fund is often used as a core position in a brokerage account, offering a convenient way to earn a return on money before investing further or while saving.

While the government and U.S. Treasury money market funds are not FDIC-insured, they are covered by the Securities Investor Protection Corporation (SIPC). The SIPC is a nonprofit organization that protects stocks, bonds, and other securities in the event that a brokerage firm goes bankrupt and assets are missing. The SIPC will cover up to $500,000 in securities, including a $250,000 limit for cash held in a brokerage account.

It is important to note that the FDIC only insures cash deposits at FDIC member banks, generally up to $250,000 per account. This coverage includes certain types of accounts at Fidelity, such as Cash Management Accounts and FDIC-insured CDs held across all accounts. However, investments and parked cash in brokerage accounts are not typically FDIC-insured but are instead covered by SIPC.

Frequently asked questions