Robinhood Withdraws Bank Says SFC
The San Francisco Chronicle writes "Robinhood drops plan to start a bank; brokerage clients still waiting for interest on cash." The article says, "Robinhood won't be opening a bank after all. The Menlo Park brokerage firm, which made a splash offering free online stock trading popular with Millennials, said it is withdrawing its application to start a federally insured bank. The venture-backed company got in hot water almost a year ago when it advertised 'checking and savings accounts' yielding 3%, on its website." The piece explains, "The accounts were not bank accounts and were not insured by the Federal Deposit Insurance Corp.... But the [SIPC] CEO ... Steve Harbeck, said they would not be protected because his company only protects cash used to buy securities.... Robinhood quickly took down references to checking and savings accounts, saying in a blog post that its announcement 'may have caused some confusion.' Instead, it said it would offer 'cash management accounts.' In April, the company said it had applied for a bank charter with the Office of the Comptroller of the Currency." The Chronicle adds, "On Oct. 8, it announced it will begin offering a cash management program within its brokerage account and started a wait-list for the feature. It said clients' 'uninvested cash' would be moved to 'program banks that pay you 2.05% APY as of October 8, 2019.' In an email, Robinhood said the program banks are Goldman Sachs Bank, HSBC, Wells Fargo, Citibank, Bank of Baroda and U.S. Bank. 'Your uninvested cash at these program banks is eligible for FDIC insurance up to a total of $1.25 million -- or up to $250,000 per bank, subject to FDIC rules,' Robinhood said in an announcement." Finally, they write, "This feature is still not available and Robinhood would not say when it will be. Uninvested cash in client accounts now earns zero. The promised rate on its cash management account is down to 1.8% as rates in general have fallen in response to recent Federal Reserve rate cuts. Robinhood said in a statement that it is 'voluntarily' withdrawing its application for a national bank charter but wouldn't say why. It said it will 'focus on increasing participation in the financial system and challenging the industry to better serve everyone.' A spokesman said the move was unrelated to the commission cuts."
