Fidelity Investments: Are Your Assets Insured And Protected?

Fidelity Investments offers a range of financial services and products, including brokerage accounts and cash management accounts. While these accounts are not FDIC-insured, they are protected by the Securities Investor Protection Corporation (SIPC), which covers up to $500,000 in securities and $250,000 for cash held in a brokerage account. Additionally, Fidelity provides its customers with excess of SIPC coverage through Lloyd's of London, which offers an additional $1 billion in protection. This excess coverage would only be used if SIPC coverage is exhausted, and it does not cover investment losses in customer accounts. For FDIC insurance, Fidelity offers an FDIC Insured Deposit Sweep Program for eligible accounts, which sweeps cash balances into FDIC-insured interest-bearing accounts at program banks, with deposits eligible for FDIC insurance. Therefore, while Fidelity Investments as a company is not insured, its customers' assets are protected through a combination of SIPC coverage, excess of SIPC coverage, and FDIC insurance for certain eligible accounts.

FDIC-insured cash deposits

Fidelity Investments offers a range of services to its customers, including the option of opening a brokerage account. This account is not a bank account, but it allows customers to spend, save, and invest.

One of the key features of the Fidelity brokerage account is its FDIC-insured cash deposits. The Federal Deposit Insurance Corporation (FDIC) is a US government agency that insures cash deposits at its member banks. The insurance coverage is generally up to $250,000 per account.

Fidelity's FDIC-Insured Deposit Sweep Program is designed to maximize FDIC insurance eligibility for its customers. Here's how it works:

• Cash balances in eligible Fidelity accounts, such as the Fidelity Cash Management Account, certain retirement accounts, and the Health Savings Account, are automatically swept into an FDIC-insured interest-bearing account at one or more program banks.
• Under certain circumstances, cash may be swept into a money market mutual fund (the "Money Market Overflow") instead. However, it is important to note that these balances are not eligible for FDIC insurance.
• To ensure that customers' deposits remain within FDIC insurance limits, Fidelity systematically distributes deposits across multiple program banks. Each bank will receive a maximum of $245,000, with any accrued interest also eligible for FDIC insurance.
• Customers can monitor the amount of cash at each program bank through Fidelity.com, as they are responsible for keeping track of their total assets to determine their FDIC insurance coverage.
• In the event that a customer's balance exceeds the FDIC insurance coverage limits at an assigned bank, they can contact Fidelity to discuss opting out of that bank or updating their program bank list.

By utilizing the FDIC-Insured Deposit Sweep Program, Fidelity helps protect its customers' cash deposits and provides them with the peace of mind that their funds are secure.

Securities covered by SIPC

Fidelity offers its customers additional "excess of SIPC" coverage. This excess coverage will only be used when SIPC coverage is exhausted. This additional coverage does not protect against investment losses in customer accounts due to market fluctuations. It also does not cover other claims for losses incurred while broker-dealers remain operational.

The total aggregate excess of SIPC coverage available through Fidelity's excess of SIPC policy is $1 billion. Within this coverage, there is no per-customer dollar limit on the coverage of securities. However, there is a per-customer limit of $1.9 million on the coverage of cash awaiting investment. This is the maximum excess of SIPC protection currently available in the brokerage industry.

Both SIPC and excess of SIPC coverage are limited to securities held in brokerage positions, including mutual funds if held in your brokerage account, and securities held in book-entry form. Neither SIPC nor the additional coverage protects against the loss of market value of the securities.

It is important to note that certain assets are not eligible for SIPC protection. Among the assets typically not eligible for SIPC protection are commodity futures contracts, precious metals, investment contracts (such as limited partnerships), and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

Fidelity's excess SIPC coverage

The total aggregate excess of SIPC coverage available through Fidelity's policy is $1 billion. Within this coverage, there is no per-customer dollar limit on the coverage of securities. However, there is a per-customer limit of $1.9 million on the coverage of cash awaiting investment. This per-customer limit is currently the maximum excess of SIPC protection available in the brokerage industry.

In summary, Fidelity's excess SIPC coverage serves as an added safeguard for its brokerage customers, providing an extra layer of protection beyond the standard SIPC limits. This coverage offers comprehensive protection for securities and cash awaiting investment, giving customers peace of mind and confidence in the safety of their investments.

FDIC-insured sweep program

Fidelity offers an FDIC-insured sweep program for eligible accounts, including the Fidelity Cash Management Account, certain retirement accounts, and the Fidelity Health Savings Account. The program sweeps uninvested cash balances into an FDIC-insured interest-bearing account at one or more program banks, maximising FDIC insurance coverage by allocating cash across multiple banks. This ensures that deposits up to a certain limit are insured by the Federal Deposit Insurance Corporation (FDIC), a US government agency that insures cash deposits at its member banks.

The FDIC-insured sweep program is designed to provide Fidelity customers with additional protection for their cash balances. By sweeping these balances into FDIC-insured accounts, customers can have peace of mind knowing that their deposits are insured up to certain limits. This is especially beneficial for customers with large cash balances, as it provides a layer of security in the event of bank failure or other financial issues.

Here's how the program works in more detail:

• Fidelity automatically transfers uninvested cash balances from eligible accounts into FDIC-insured interest-bearing accounts at program banks.
• To maximise FDIC coverage, Fidelity may use multiple banks to allocate cash deposits. This is because FDIC insurance coverage is currently limited to $250,000 per qualified customer account per banking institution. By spreading deposits across multiple banks, customers can increase their overall coverage.
• 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 other available program banks.
• Customers can view the amount of cash at each program bank at any time via Fidelity.com, providing transparency and easy access to their funds.
• In addition to the program banks, there is also the Money Market Mutual Fund Overflow ("Money Market Overflow") component of the program. This component comes into play when cash balances exceed FDIC insurance limits or when there is a lack of capacity at the program banks. In such cases, excess funds are swept into the Fidelity Government Money Market Fund, also known as the Money Market Overflow fund. It's important to note that funds in the Money Market Overflow are not FDIC-insured but are eligible for SIPC coverage under SIPC rules.

Overall, the FDIC-insured sweep program offered by Fidelity provides an added layer of protection for customers' cash balances. By utilising this program, customers can take advantage of FDIC insurance coverage and have confidence that their deposits are insured up to certain limits. This program is particularly beneficial for those with substantial cash balances, as it helps safeguard their funds in the event of bank-related issues.

SIPC and excess SIPC protection for brokerage accounts

The Securities Investor Protection Corporation (SIPC) is a non-profit organisation that protects investors' stocks, bonds, and other securities in the event that their brokerage firm goes bankrupt and assets go missing. It is not a government agency and does not cover investment losses due to market fluctuations.

SIPC will cover up to $500,000 in securities, with a $250,000 limit for cash held in a brokerage account. All Fidelity brokerage accounts are covered by SIPC, including money market funds held in a brokerage account.

Fidelity also provides its customers with additional "excess of SIPC" coverage. This excess coverage will only be used when SIPC coverage is exhausted. Like SIPC, excess protection does not cover investment losses in customer accounts, including losses due to market fluctuations. The total aggregate excess of SIPC coverage available through Fidelity's policy is $1 billion. Within this coverage, there is no per-customer dollar limit on the coverage of securities, but there is a per-customer limit of $1.9 million on the coverage of cash awaiting investment. This is the maximum excess of SIPC protection currently available in the brokerage industry.

Both SIPC and excess of SIPC coverage are limited to securities held in brokerage positions, including mutual funds if held in a brokerage account, and securities held in book-entry form. Certain assets are not eligible for SIPC protection, including commodity futures contracts, precious metals, investment contracts (such as limited partnerships), and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

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