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MAXIMIZING FDIC INSURANCE COVERAGE DURING FINANCIAL SWEEPS

IP.com Disclosure Number: IPCOM000243460D
Publication Date: 2015-Sep-23
Document File: 6 page(s) / 100K

Publishing Venue

The IP.com Prior Art Database

Abstract

Cash in a brokerage sweep account for a customer can be transferred to chartered financial institutions in such a manner that Federal Deposit Insurance Corporation (FDIC) coverage is maximized at the chartered financial institutions. Currently the FDIC insurance limit is $250,000 per depositor for a specific type of account at a chartered financial institution. This document describes how cash from individual customer accounts is taken into account when determining how much of a brokerage sweep account to transfer to a chartered financial institution in order to maximize FDIC coverage for the customer at the chartered financial institution.

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MAXIMIZING FDIC INSURANCE COVERAGE DURING FINANCIAL SWEEPS

    The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance guaranteeing the safety of depositor's accounts at financial institutions that are insured by the FDIC. The depositor's accounts are insured up to an FDIC limit, currently $250,000, for each deposit ownership category at an FDIC member financial institution. Some examples of deposit ownership categories include individual accounts, joint accounts, certain retirement accounts, revocable trust accounts and irrevocable trust accounts.

    Investors commonly make use of brokerage sweep accounts to earn interest on cash earmarked for brokerage investments. In a sweep program, cash in a brokerage sweep account can be transferred to a money market deposit account or similar type of account where the cash can earn interest. When the cash is transferred to an FDIC member financial institution, depending on an amount that is transferred, all or part of the cash that is transferred can be insured by the FDIC.

    This document describes automatically maximizing FDIC insurance coverage for cash transferred from one account, such as a brokerage sweep account, to an FDIC member financial institution account. The cash from the brokerage sweep account can be transferred to two or more FDIC chartered financial institutions. Individual funds held at the chartered financial institution are taken into account when determining the amount of brokerage sweep account cash to be transferred to each of the chartered financial institutions. The amount of brokerage sweep account cash transferred to each of the chartered financial institutions is such that a sum of the individual funds held at the chartered financial institution and the amount of brokerage sweep account cash transferred to the chartered financial institution is ideally less than or equal to the FDIC limit for the client at the chartered financial institution.

    A chartered financial institution is a financial institution (e.g., bank, brokerage, etc.) that has received appropriate regulatory approval to operate and/or to receive certain government guarantees, for example to be eligible for FDIC insurance. The chartered financial institutions are regulated by laws of the United States and normally receive a charter to engage in business. The charter specifies the regulations under which the financial institution must operate and comply. A chartered financial institution can have a plurality of branch offices and geographical locations.

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    A brokerage sweep account is a cash account that automatically transfers cash amounts into an interest earning investment at the close of each business day. The cash amounts can comprise cash that is earmarked for a brokerage investment such as a stock or mutual fund purchase. The cash amounts are commonly transferred back into the cash account at the start of the next business day to be available for any brokerage purchases...