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USE OF BROKERED FINANCIAL INSTITUTION DEPOSITS DURING FINANCIAL INSTITUTION SWEEPS

IP.com Disclosure Number: IPCOM000243461D
Publication Date: 2015-Sep-23

Publishing Venue

The IP.com Prior Art Database

Abstract

Cash in brokerage sweep accounts can be swept overnight to insured cash accounts at chartered financial institutions in order to earn interest on the cash that is transferred. When the cash amounts in the brokerage sweep account are high, brokered financial institution deposits can be used to provide a higher interest rate for the customer than can be obtained using financial institution sweeps. The brokered financial institution deposits are cash amounts that are manually deposited into a brokered financial institution account.

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USE OF BROKERED FINANCIAL INSTITUTION DEPOSITS DURING FINANCIAL INSTITUTION 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 account 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 using brokered financial institution deposits to provide a higher interest rate to clients than can be obtained using financial institution sweeps. The brokered financial institution deposits are cash amounts that are generally manually deposited, typically by a financial advisor, into a brokered financial institution account. The brokered financial institution account is a financial institution account that can earn a higher interest rate than a standard financial institution savings account but that provides less risks or restrictions than money market funds, certificates of deposits or other similar types of investments.

    A brokerage sweep account is an account that a customer of a financial institution can use to deposit cash that is typically earmarked for security purchases. At the end of a business day, the cash in the brokerage sweep account is automatically transferred to an interest earning account, for example a money market fund, so that the cash can earn interest. At the start of the next business day, the cash is automatically transferred back to the brokerage sweep account. A process for automatically transferring cash from the brokerage sweep account to the interest earning account is commonly known as a financial institution sweep. In some implementations, a certain predetermined cash amount is kept in the brokerage sweep account and cash amounts

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greater than the predetermined cash amount are transferred to the interest earning account. In this disclosure, the terms client and customer can be used interchangeably.

    The brokered financial institution account can be used when cash amounts in the brokerage sweep account may be too high. For example, if the customer recently sold a business and received a large amount of cash, for example $20 million, and the customer wants to receive a higher interest rate for the cash that can be o...