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Asset Protection

Security of your investments is the starting point for long term success. While investments will fluctuate with the markets, we utilize third-party custodians like Charles Schwab to guarantee the safekeeping of your assets. Our client's investments are also protected through SIPC, the Securities Investor Securities Corporation. 

Custodian for Safekeeping Your Assets: Charles Schwab & Co.

Custodian for Safekeeping Your Assets: Charles Schwab & Co.

 Your Assets Are Protected At Schwab.

We work hard to make Schwab a secure and safe place for your money. Whether you hold securities like stocks, bonds, mutual funds, exchange traded funds, or money market funds in a Schwab brokerage account, or cash deposits in a Schwab Bank account, we have your assets protected. Here are answers to the most common questions about all the ways Schwab works to keep your money safe. 

 

How are my securities at Schwab protected?

The first thing to remember is your securities—like stocks, bonds, mutual funds, exchange traded funds, or money market funds—held at Schwab are yours. The SEC's Customer Protection Rule safeguards customer assets at brokerage firms by preventing firms from using customer assets to finance their own proprietary businesses. 

At Schwab, clients' fully paid securities are segregated from other firm assets and held at third party depository institutions and custodians such as the Depository Trust Company and Bank of New York. There are reporting and auditing requirements in place by government regulators to help ensure all broker-dealers comply with this rule. In the very unlikely event that Schwab should become insolvent, these segregated securities are not available to general creditors and are protected against creditors' claims.

If you have a margin account with a current loan balance, Schwab may borrow a portion of the securities pursuant to the loan consent provision of your account agreement. If there is not a current margin loan balance, or it is not a margin account, securities will not be borrowed out of your account. Per regulation, any securities that are borrowed are fully collateralized with cash that is held in reserve for clients.

 

What part of my assets are protected by FDIC?

The Federal Deposit Insurance Corporation (FDIC) is an independent agency that maintains the Deposit Insurance Fund which is backed by the full faith and credit of the United States government. Its purpose is to protect depositors' funds placed in banks and savings associations.

The FDIC insures accounts held at member banks up to $250,000 per depositor, per insured bank, based on ownership category. However, all deposits held at the same FDIC-insured bank in the same ownership capacity are added together to determine your total amount of FDIC insurance coverage at that bank. This rule applies whether you open an account directly at the bank (such as a Schwab Bank Investor Checking™ or Schwab Bank Investor Savings account™), or whether Schwab brokerage holds the accounts on your behalf (such as through Schwab's Bank Sweep feature). Bank Sweep deposits may be swept into more than one Program Bank to extend the total FDIC coverage available to you.

 

You can find more detailed information on the amount you have in each bank by account on the Balances page or by going to schwab.com/login > Accounts > Balances. It is also available on your statement.

CDs in Schwab's CD marketplace, Schwab CD OneSource®, are also protected by the FDIC. CDs you purchase through Schwab are aggregated with other deposits you hold at each issuing institution and are FDIC-insured up to $250,000 per bank.

 

What is SIPC coverage and when does it become activated?

Schwab is a member of Securities Investor Protection Corporation (SIPC), which provides protection for securities and cash in client brokerage accounts, including those held by clients of investment advisors with Schwab Advisor Services. SIPC protections are activated in the rare event that the broker-dealer fails (bankruptcy) and client assets are missing due to fraud or other causes. 

According to SIPC, most broker-dealer failures happen with no securities missing. Since their inception over 50 years ago, 99% of eligible investors got their investments back in the failed brokerage firms cases that it has handled. The SIPC liquidation process generally assures that customers of a failed broker-dealer receive their securities and cash with reasonable promptness after filing a claim.

 

How does SIPC coverage work?

SIPC protects against the loss of cash and securities—such as stocks and bonds—held by a customer at a SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with a Schwab account is treated the same as a resident or citizen of the United States with a Schwab account.  

SIPC coverage is used to reimburse customers if there is a shortage after all customer assets held at the brokerage firm have been recovered. SIPC provides up to $500,000 of protection for brokerage accounts held in each separate capacity (e.g., joint tenant or sole owner), with a limit of $250,000 for claims of uninvested cash balances. These limits do not mean that the account will only receive up to $500,000 of their invested securities. Rather, in a SIPC customer proceeding, the account will receive a pro-rata share of all client assets recovered in liquidation then will receive up to $500,000 from SIPC to make up any difference that exists. SIPC does not protect against the decline in value of customer securities.

 

Does Schwab have any additional protections for client securities beyond those provided by SIPC?

Yes, in addition to SIPC, Schwab clients receive an extra level of coverage through "excess SIPC" insurance protection for securities and cash. This helps ensure claims will be covered in the event of a brokerage firm failure and funds covered by SIPC protections are exhausted. Schwab's Excess SIPC program has a $600 million aggregate (meaning the most the program will pay for the Excess SIPC portion of the losses). Commodity interests, futures contracts and cash in futures accounts are not protected by SIPC. 

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SIPC - Securities Investor Protection Corporation

SIPC - Securities Investor Protection Corporation

SIPC, The Securities Investor Protection Corporation, protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a SIPC-member brokerage firm. 

SIPC does not protect against the decline in value of your securities. SIPC does not protect individuals who are sold worthless stocks and other securities. 

Investments in the stock market are subject to fluctuations in market value. SIPC was not created to protect these risks. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investment falls for any reason.



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Custodian for Safekeeping Your Assets: SEI Private Trust Company

Custodian for Safekeeping Your Assets: SEI Private Trust Company

SEI Private Trust Company does not commingle your assets with its own or other investors. Many brokers and banks can commingle investor funds. They can lend securities, offer margin lending and use their clients’ assets as collateral for their own borrowing. Unfortunately, this commingling of funds has been a factor in fraud situations.

As a trust company, SEI Private Trust Company cannot commingle funds or use client funds in its own account for any use—lending or otherwise—because all client assets are held in an account under the client’s name. SEI Private Trust Company does not participate in margin lending. Margin lending, in which client assets are used as collateral for the broker’s or bank’s lending activities, has also been seen as a primary cause of at least one high-profile failure. SEI Private Trust Company cannot pledge, lend or margin client assets that are held in its custody.

SEI Private Trust Company—not an outside firm—maintains custody of all client assets. Perhaps the largest fraud in financial history was perpetrated through manipulation of custody records for client accounts. SEI does not allow custody of client assets by any of the investment firms with which we work. Instead, all assets are held at SEI Private Trust Company. While our third-party money managers are responsible for security selection, we do not send client funds to these firms. We do not purchase products from these firms. They are simply granted access to trade securities on our platform, which we then monitor. And even though we do not allow outside firms to custody our clients’ assets, we still perform rigorous due diligence on them. 

Other safeguards and services for your protection Insurance To help protect investors from employee errors and omissions events, SEI maintains a current Errors and Omissions Professional Liability policy. In addition, we provide fidelity bond coverage for protection against employee dishonesty, including forgery or alteration, premises, transit, counterfeit currency, computer systems, and other coverages. 

Services As the custodian of your financial assets, SEI Private Trust Company is responsible for the following services:

  • Safekeeping. Storage of your financial assets
  • Reporting package. Periodic statement reporting that details your account value and activity, quarterly performance reports, and year-end tax reporting to assist you in completing your income tax forms
  • Trade settlement. Receipt and delivery of securities and collection and distribution of proceeds from purchases and sales
  • Income distribution. Collection and payment of dividends and interest payments
  • Custodian-to-custodian transfers. Accounting for the movement of securities from and to other custodians › Cash processing. Collection of assets and distribution of withdrawals
  • Corporate action accounting. Accounting for activities such as stock splits and mergers
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