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Bank Deposit Sweep Program FAQ (Pershing)
FAQS ABOUT THE BANK DEPOSIT SWEEP PROGRAM
The Bank Deposit Sweep Program is the core account investment vehicle for all eligible brokerage accounts held at Pershing, LLC. For complete information about the Bank Deposit Sweep Program, please review the Bank Deposit Sweep Program Disclosure Document located in the Investors section of Securities America, Inc.’s public website.
What is the Bank Deposit Sweep Program?
The Bank Deposit Sweep Program is a core account investment vehicle used to hold cash balances while awaiting reinvestment. The cash balance in a brokerage account at Pershing will be automatically deposited or “swept” into an interest-bearing Bank Deposit Sweep Program account.
What are the key features of the program?
The program provides eligible accounts up to $2.5 million ($5 million for joint accounts) in maximum cumulative FDIC coverage with deposits held at a network of multiple banks. The list of participating banks is located in the Investors section of Securities America, Inc.’s public website.
Which accounts are eligible for FDIC coverage in the Bank Deposit Sweep Program?
Most accounts are eligible for the program, with the exception of 403(b) accounts and accounts with an address of record outside of the United States.
What is the difference between coverage provided by FDIC and SIPC?
SIPC provides protection from insolvency of a broker-dealer while funds are held by Securities America, Inc./ Pershing. FDIC provides protection of principal and interest while funds are held in the bank deposit account. Further description of FDIC coverage is available at www.fdic.gov.
How much FDIC Protection is provided?
For all eligible accounts at Pershing, deposits are held at a network of multiple banks, and insurance is currently up to a cumulative $2.5 million ($5 million for joint accounts). Funds are swept into deposit accounts at program banks up to a maximum amount per bank (currently $246,500). When a client’s total amount of funds deposited through the program to each bank in the program reaches the maximum amount, any additional funds in the brokerage account are swept into an “Excess Deposit Bank” without regard to FDIC insurance limitations. Funds invested in the Excess Deposit Bank that exceed the maximum amount are not covered by FDIC Deposit Insurance.
How can I decline placing deposits at participating bank?
To opt out of a bank on the list, please contact your financial professional. The total FDIC coverage you receive may be reduced upon designation of a bank or banks as ineligible for deposits. Participation in the Bank Deposit Sweep Program requires that at least one bank is designated as eligible to receive deposits.
Is cash really safer in an FDIC sweep like the Bank Deposit Sweep Program than in a Money Fund sweep?
The Bank Deposit Sweep Program uses an insured bank deposit account. This means that eligible deposits held at a program bank cannot lose principal or interest (with coverage up to the FDIC maximum). It also means that, in the event of a bank failure, clients will be paid promptly, usually within a few weeks after the FDIC takes over a failed bank. Money market funds can lose value and have in the past. Some money market funds have suspended the ability of their customers to take their money out of the fund (redeem) for several months. The potential loss of principal is called the “safety factor,” and how long it takes to get money in an emergency is called the “liquidity factor.” Both of these and two other important factors (rate and convenience) should be considered when comparing money market funds and the Bank Deposit Sweep Program.
What can you tell me about the banks in the program?
Banks in the network program are selected based on initial and ongoing review of their strength as documented by the FDIC and the operational needs of the program. A current list of program banks is available at in the Investors section of Securities America, Inc.’s public website.
Which banks on the program bank list apply to my account(s)?
Your Pershing brokerage statement will reflect the balance and location of deposits.
What are cash balance tiers, and how are they assigned?
A tier refers to the ascending ranges of cash balances that determine the rate paid on the cash inside the Bank Deposit Sweep Program account as shown below. Each month on your account statement cutoff date, the average cash balance in your account since the previous statement cutoff will be computed, and that account will be assigned to one of the tiers. If cash balances change significantly, it might move the balance from one tier to the next or even move several tiers. The cash in all of a client’s accounts is not aggregated to determine the tier; each account stands on its own for tier assignment purposes.
- $2,000,000 or greater
- $750,000 up to $$1,999,999.99
- $250,000 up to $749,999.99
- $100,000 up to $249,999.99
- $25,000 up to $99,999.99
- $10,000 up to $24,999.99
- Less than $10,000
How do Bank Deposit Sweep Program rates compare to bank checking and savings balances that do not have minimum balance requirements?
There can be exceptions, however, rates offered under this program can be more competitive than those offered by large national banks. Keep in mind that making these comparisons can be difficult, because there is much more involved than just the rate paid. The Bank Deposit Sweep Program is unique in that it pays a savings-like rate of interest but has the transaction flexibility of a brokerage account (including available check writing features), no penalties for failure to maintain minimum balances, and no penalties for early withdrawals.
How do Bank Deposit Sweep Program rates compare to other broker-dealer rates?
Not all broker-dealers offer insured bank deposit sweep vehicles or have the same access and convenience features. Compared to broker-dealers that do offer a similar product, the rates offered by the Bank Deposit Sweep Program are competitive.
Where can I get additional information about rates or the Bank Deposit Sweep Program?
Contact your financial professional to get additional information or contact Securities America, Inc..
For complete information about our Bank Deposit Sweep Program, please review the Bank Deposit Sweep Program Disclosure Document located in the Investors section of Securities America, Inc.’s public website.
Mutual funds are investments involving risk and are offered by prospectus only. Investment return and principal value will fluctuate so that upon redemption an investor's shares may be worth more or less than original value. An investor should carefully consider the investment objectives, risks, charges and expenses before investing. The fund prospectus contains this and other information about the investment company. For a copy of the prospectus, please contact your financial professional. Read the prospectus carefully before investing or sending money.