Brokered Deposits / CDs -- Proper Documentation

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vst
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Brokered Deposits / CDs -- Proper Documentation

Post by vst »

Alright,

I know there are a few of you who claim you invest in brokered deposits (aka Brokered Certificates of Deposit) through your broker.

Some of you may or may not know the strict rules regarding FDIC insurance and how it works when it comes to brokered deposits. I emailed the FDIC to clarify and in a nutshell, this is what I was told:

Brokered Deposits are "fiduciary" accounts. As such, the fiduciary nature of the account be disclosed in the account title and the details of the underlying "owners" must be ascertainable by the "good" recordkeeping of brokers and custodians entrusted with this (aka your broker, DTC, etc.).

Furthermore, brokered deposits are UNLIKE a regular bank CD in the aspect of getting a physical certificate. Most brokered deposits are registered in "book entry" form at the broker/custodian. And based on what I've read, most brokered deposits are issued as large master certificates of deposit into street name. Based on my broker's literature, the master CD is issued into the name of "CEDE & CO, as Nominee for others". Cede and Co. is affiliated with DTC which in turn most brokers are members of DTC.

Now the problem I'm encountering is, I am unable to actually get a copy of the MASTER CD for my brokered deposits which show me that they are registered correctly (or registered at ALL). Based on what the FDIC told me, if they are incorrectly registered to just "CEDE & CO" and inadvertantly leave out the Fiduciary role in the title of the CD, then the CD (the master certificate) could end up being UNDER-insured (i.e. if the issuing bank fails, the Master CD would only be insured up to 250k through 2013. The Master CD could potentially be a 1 million dollar CD of which I may only own a $15,000 piece (in theory). My theoretical 15k piece could be UNinsured if the master certificate were NOT titled correctly.

So far, I'm having a HELL of a time getting my broker to give me the D*** master certificate title (or a copy of it). Even though the SEC and FDIC clearly state that investors should ask and receive a copy of the master certificate title. See below.

http://www.sec.gov/investor/pubs/certific.htm
Ask About Your Deposit Broker’s Record-Keeping – Good account records by your deposit broker can ensure your CD will have federal deposit insurance and, in the event of a bank closing, you’ll be paid quickly. For example, unlike traditional bank CDs, brokered CDs are sometimes held by a group of unrelated investors. Instead of owning the entire CD, each investor owns a piece. Confirm with your broker how your CD is held, and be sure to ask for a copy of the exact title of the CD. If several investors own the CD, the deposit broker will probably not list each person's name in the title. But you should make sure that the account records reflect that the broker is merely acting as an agent for you and the other owners (for example, "XYZ Brokerage as Custodian for Customers"). This will ensure that your portion of the CD qualifies for full federal deposit insurance coverage.

and this from the FDIC
http://www.fdic.gov/CONSUMERS/CONSUMER/ ... ankCD.html
Also, insist that the broker give you a copy of the exact title of the CD issued by the FDIC-insured bank or savings association. Why? Because if the CD is to be shared by you and many other customers, the deposit broker probably won't list each name in the CD's title. That's permissible, but Hencke says you'll still want the account records to somehow indicate that the broker is acting as an agent for you and other depositors (such as "XYZ Brokerage as Custodian for Customers"). That way, each depositor can qualify for up to $100,000 of FDIC coverage. Otherwise, the FDIC would treat the broker as the owner of the CD and insure it only to $100,000 in total, even if the broker pooled the funds of many different depositors into one CD totaling more than $100,000. "If the broker refuses to provide you with documentation reflecting the title, you should not entrust your money to the broker," Hencke says.


So, I ask the forum, what should I (we) do? Has anyone else successfully asked for and received a copy of their master CD title?
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Post by Buysider »

So, I ask the forum, what should I (we) do? Has anyone else successfully asked for and received a copy of their master CD title?
Use a big retail brokerage firm, because every brokerage firm I've seen that sells brokered CDs says they are FDIC insured. If they aren't, and the bank goes bust, the broker would have to make good. All brokerage firms have risk limits anyway on CD sales, I doubt any one bank going bankrupt could force a good sized brokerage firm (like Fido, Schwab or Vanguard) out of business.

Bottom line, I could care less how Schwab/Fidelity/Vanguard titles their CDs at 3rd bank of southeast omaha ... if they say the CD they sell you is covered up to $250k, it is, either by the FDIC or them.
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Post by vst »

No, the trade confirm says "may be FDIC insured"


that's cause they cannot guarantee FDIC insurance. Only the FDIC can, up to a limit and conditionally based on how it's titled.
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Post by spam »

Brokerage CD's are supposed to be transferrable. Transfer your CD to either Fidelity or Vanguard and ask them what the skinny is. Either brokerage would be pleased to have your business unless there is some kind underlying problem.

If you can transfer it, then some record must exist which proves legitimate ownership and thus qualify you for FDIC insurance if the issuing bank is a member.

I'm thinkng that the smiling girl on the phone at Fidelity may be able to get a more direct answer to your questions during the transfer process.
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Post by linuxizer »

Buysider wrote:Bottom line, I could care less how Schwab/Fidelity/Vanguard titles their CDs at 3rd bank of southeast omaha ... if they say the CD they sell you is covered up to $250k, it is, either by the FDIC or them.
While I get what you're saying, if this is the only backing, why not just buy a bond from a corporation you judge to be of similar quality and get the higher yield? If you're giving up serious interest for security, it makes sense to ensure it's secure....
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Post by Bob's not my name »

spam wrote:Brokerage CD's are supposed to be transferrable. Transfer your CD to either Fidelity or Vanguard and ask them what the skinny is. Either brokerage would be pleased to have your business unless there is some kind underlying problem.

If you can transfer it, then some record must exist which proves legitimate ownership and thus qualify you for FDIC insurance if the issuing bank is a member.

I'm thinkng that the smiling girl on the phone at Fidelity may be able to get a more direct answer to your questions during the transfer process.
I've done exactly this, from several brokers to Vanguard, without a problem.
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Post by dm200 »

I manage an institution's investments. We use Vanguard Brokerage Services for brokered CDs, and currently have about $900,000 in these brokered CDs. We rely on Vanguard's certification that the CDs are all from FDIC insured banks/thrifts. It is our responsibility to stay at or under the FDIC $250,000 limit.

There have been several failures of banks where we had CDs, and we received the full amount from the FDIC.
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Post by vst »

dm200 wrote:I manage an institution's investments. We use Vanguard Brokerage Services for brokered CDs, and currently have about $900,000 in these brokered CDs. We rely on Vanguard's certification that the CDs are all from FDIC insured banks/thrifts. It is our responsibility to stay at or under the FDIC $250,000 limit.

There have been several failures of banks where we had CDs, and we received the full amount from the FDIC.
Getting certification from the broker that the CDs are from FDIC insured thrifts is NOT the issue. Read what I said above about the titles to the CDs you hold.

See, brokered deposits are NOT cut and dry like regular direct CDs. These brokered deposits are ALL fiduciary accounts and are treated as such by the FDIC. They look at the titles of these CDs (almost all of which are held in custody at the DTC). So, while you are right that Vanguard might say these are from FDIC insured institutions, the CDs themselves may have an error in the titling (theoretical of course). Without getting a copy of the certificates (the MASTER certs), we have no way of making sure they have the fiduciary title as required by the FDIC in the account title at the DTC.

Let's say one of the many CDs you hold suddenly had the underlying bank fail. Let's just say that the FDIC goes to the DTC and says, let's see this CD (the MASTER cert). Let's just say the MASTER cert says Account Title "Cede & Co" and fails to say "as nominee for others". Now, the Master Cert (which could be issued at 1 million PLUS) will be UNDER or UN-insured for anything above 250k (because the FDIC will the example I just gave as a "corporate" account vs a Fiduciary account which allows for pass through insurance). That affects you because the FDIC uses STRICT rules to interpret the "pass through" insurance which you have on your portion of the master certificate. Without the correct titling on the master cd, your portion will not have the necessary flow through insurance. Does that make sense???

I've done lots of research into this and I also emailed the FDIC. I have proof that they WANT us to make sure that the master certs are all titled correctly.
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Post by dm200 »

vst wrote:
dm200 wrote:I manage an institution's investments. We use Vanguard Brokerage Services for brokered CDs, and currently have about $900,000 in these brokered CDs. We rely on Vanguard's certification that the CDs are all from FDIC insured banks/thrifts. It is our responsibility to stay at or under the FDIC $250,000 limit.

There have been several failures of banks where we had CDs, and we received the full amount from the FDIC.
Getting certification from the broker that the CDs are from FDIC insured thrifts is NOT the issue. Read what I said above about the titles to the CDs you hold.

See, brokered deposits are NOT cut and dry like regular direct CDs. These brokered deposits are ALL fiduciary accounts and are treated as such by the FDIC. They look at the titles of these CDs (almost all of which are held in custody at the DTC). So, while you are right that Vanguard might say these are from FDIC insured institutions, the CDs themselves may have an error in the titling (theoretical of course). Without getting a copy of the certificates (the MASTER certs), we have no way of making sure they have the fiduciary title as required by the FDIC in the account title at the DTC.

Let's say one of the many CDs you hold suddenly had the underlying bank fail. Let's just say that the FDIC goes to the DTC and says, let's see this CD (the MASTER cert). Let's just say the MASTER cert says Account Title "Cede & Co" and fails to say "as nominee for others". Now, the Master Cert (which could be issued at 1 million PLUS) will be UNDER or UN-insured for anything above 250k (because the FDIC will the example I just gave as a "corporate" account vs a Fiduciary account which allows for pass through insurance). That affects you because the FDIC uses STRICT rules to interpret the "pass through" insurance which you have on your portion of the master certificate. Without the correct titling on the master cd, your portion will not have the necessary flow through insurance. Does that make sense???

I've done lots of research into this and I also emailed the FDIC. I have proof that they WANT us to make sure that the master certs are all titled correctly.
Very good questions, I think. Have you dealt with Vanguard on this issue?

I would think (correct me if I am wrong) that, for Vanguard at least, ALL of the CDs that they hold would have the same titling and, while a mistake could occur, it is not like they title some CDs one way and others another way. I may check on this with folks who are smarter about such things.
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Post by azbryanw »

I think the question you need to ask is:

Can I have a copy of the prospectus? If a prospectus isn't available (ie. it's a new issue) then you are entitled to receive a copy of the red herring. These documents will disclose everything you need to know and is technically the "master CD"
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Post by vst »

azbryanw wrote:I think the question you need to ask is:

Can I have a copy of the prospectus? If a prospectus isn't available (ie. it's a new issue) then you are entitled to receive a copy of the red herring. These documents will disclose everything you need to know and is technically the "master CD"
So, even if I purchase a CD on the secondary market, the prospectus would be available (I did not know a prospectus was available for CDs). What by the way is a "red herring" in the context of what you are saying above??
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Post by LadyGeek »

I added a section on brokered CDs in the wiki. Those references had a lot of good info.

Please see Certificate of Deposit on the Bogleheads Wiki.

Comments / corrections are welcome. Wiki editors should update directly.
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Post by vst »

Another question:

Do those of you that have brokered CDs, do you have Moody's, S&P or Fitch ratings included on your trade confirms and/or brokerage statements? The reason I ask is because i was told that the broker subscribes to a rating service that assigns a rating to the underlying bank. Sometimes, the underlying bank is less than AAA or in some instances is actually rated below investment grade. Does Vanguard assign ratings for brokered CDs?
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Post by tfb »

I trust my broker knows how to registers these CDs. It's a routine business matter. In the unlikely events the bank failed AND the broker's paperwork was not perfect AND the FDIC refuses to extend coverage, I trust the broker will make me whole. I'm not going to become an auditor for my broker. I take that risk. If you don't like this risk, that's totally understandable. Don't buy brokered CDs then. Buy them directly from a bank.

To your 2nd q about ratings, Fidelity displays Moody's and S&P ratings in the quotes. Some of the CDs with highest yields from Vanguard are issued by banks in Puerto Rico with below investment grade ratings. For some reason Schwab and Fidelity don't sell them. That's one reason the highest CD yields at VBS are higher that those at Schwab or Fidelity.
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Post by vst »

tfb wrote:I trust my broker knows how to registers these CDs. It's a routine business matter. In the unlikely events the bank failed AND the broker's paperwork was not perfect AND the FDIC refuses to extend coverage, I trust the broker will make me whole. I'm not going to become an auditor for my broker. I take that risk. If you don't like this risk, that's totally understandable. Don't buy brokered CDs then. Buy them directly from a bank.

To your 2nd q about ratings, Fidelity displays Moody's and S&P ratings in the quotes. Some of the CDs with highest yields from Vanguard are issued by banks in Puerto Rico with below investment grade ratings. For some reason Schwab and Fidelity don't sell them. That's one reason the highest CD yields at VBS are higher that those at Schwab or Fidelity.
Ok, so ratings are standard industry practice. Up until recently, I had never seen a bank CD get rated before. Some Lehman CDs are below investment grade based on my statements and confirms. I always wondered how a FDIC insured CD could get a rating below investment grade....

Thanks for sharing.

BTW, both the SEC and the FDIC appear to state that the burden of making sure the CD is titled correctly is shared by both the broker and the investor.
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Post by LadyGeek »

There was one other point brought out by the SEC notice. You need to be sure that the brokered CD is not with your own bank, as it will count against your FDIC insurance limit.
Wiki wrote:Because federal deposit insurance is limited to a total aggregate amount of $250,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. In other words, find out where the deposit broker plans to deposit your money. Your deposit broker may plan to put your money in a bank or thrift where you already have CDs or other deposits. You risk not being fully insured if the brokered CD would push your total deposits over the $250,000 federal deposit insurance limit.
Please see Certificate of Deposit on the Bogleheads Wiki.
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Post by dm200 »

LadyGeek wrote:There was one other point brought out by the SEC notice. You need to be sure that the brokered CD is not with your own bank, as it will count against your FDIC insurance limit.
Wiki wrote:Because federal deposit insurance is limited to a total aggregate amount of $250,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. In other words, find out where the deposit broker plans to deposit your money. Your deposit broker may plan to put your money in a bank or thrift where you already have CDs or other deposits. You risk not being fully insured if the brokered CD would push your total deposits over the $250,000 federal deposit insurance limit.
Please see Certificate of Deposit on the Bogleheads Wiki.
Yes. This is a reason that there may be a alight delay in getting the funds from the FDIC when a bank/thrift fails. The bank/thrift knows its own direct depositors and how much is FDIC insured, so that can be paid out immediately. But, for brokered CDs, the FDIC has to get ALL of the holders of brokered CDs and create a master list of all deposits so that they can determine the limits. You could have CDs from several brokers, as well as direct deposits in the bank/thrift, but the one FDIC limit applies to all deposits under the same ownership.
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Post by muddlehead »

to the op, i have many cd's in my brokerage account. so, i'm interested in all discussions of the topic. i also worked 25 years in the business. what exactly are your concerns re: owning cd's in your brokerage account?
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Post by vst »

muddlehead wrote:to the op, i have many cd's in my brokerage account. so, i'm interested in all discussions of the topic. i also worked 25 years in the business. what exactly are your concerns re: owning cd's in your brokerage account?

I have a LOT of brokered CDs, too. Mainly because I was able to make quite a few purchases on the secondary market at or below par for 5% and above.

Long story short, my only concern is NOT whether my CDs are from FDIC insured institutions, but whether or not the DTC (where they are registered) has the correct title listed on the master CD. To date, I have been unsuccessul in getting a copy of the CD title from the DTC through my broker or its custodian for my account.

Both the FDIC and the SEC say we are entitled to this documentation and that we should do our due diligence in securing this information (see my original post).

Secondary to that, I was concerned when I started to see ratings on some of my CDs. I own a Lehman Bank CD and based on what the broker has written on its confirmation/statement, the instrument is rated below investment grade. I was confused as to how a government backed security could get any rating below AAA. But based on the comments in this thread, I guess its possible if we look solely at the strength of the issuing bank and not at the underlying FDIC backing.
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Post by dm200 »

Secondary to that, I was concerned when I started to see ratings on some of my CDs. I own a Lehman Bank CD and based on what the broker has written on its confirmation/statement, the instrument is rated below investment grade. I was confused as to how a government backed security could get any rating below AAA. But based on the comments in this thread, I guess its possible if we look solely at the strength of the issuing bank and not at the underlying FDIC backing.
I am not familiar with CD ratings from brokers, but the strength of the issuing bank is relevant because many purchases of CDs are not insured because they are over the FDIC limits AND, even if you get the funds in case of the bank failure, you may get the funds back before maturity and do not have the change to get the same return.
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Post by LadyGeek »

Newbie question: Is DTC the Depository Trust Company (DTC)?

I assume this company does the CD title certification.
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Post by vst »

Yes,

DTC is the Depository Trust Corp.

I believe when anything goes into street name, it actually goes into their name as "nominee" for the true owners.
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Post by muddlehead »

vst. fair questions. 1. dtc does not know who you are. the cd issuing bank does not know who you are. the brokerage firm does not supply the names/acct numbers of the accounts which have the cd's to either the cd issuing bank or the dtc. or, for that matter, to anyone. if that is a concern for you, my only advice would be not to invest in them. certain no one at any institution will say that to you because it sounds disrespectful and flippant. unfortunately, no other way to put it.
2. ratings. i don't care and i suggest you shouldn't either. stay within the fdic guidelines - i still buy no more than 95k per cd in taxable acct even though the limit is 250k for awhile. when the 250k limit ends, not for one day do i want to be over the limit. i have had a few cd issuers over the years go belly up. when that happens, brokerage firm makes me whole pretty soon thereafter. and then i buy another cd...
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Post by vst »

muddlehead wrote:vst. fair questions. 1. dtc does not know who you are. the cd issuing bank does not know who you are. the brokerage firm does not supply the names/acct numbers of the accounts which have the cd's to either the cd issuing bank or the dtc. or, for that matter, to anyone. if that is a concern for you, my only advice would be not to invest in them. certain no one at any institution will say that to you because it sounds disrespectful and flippant. unfortunately, no other way to put it.
2. ratings. i don't care and i suggest you shouldn't either. stay within the fdic guidelines - i still buy no more than 95k per cd in taxable acct even though the limit is 250k for awhile. when the 250k limit ends, not for one day do i want to be over the limit. i have had a few cd issuers over the years go belly up. when that happens, brokerage firm makes me whole pretty soon thereafter. and then i buy another cd...

Like you, I stay under the OLD FDIC limit when I buy CDs for the same reasons.

I didn't expect the broker to share my information with the DTC, FDIC or issuing bank. But I DO expect the broker to ensure that the DTC has correctly titled the CD at DTC to ensure "pass-through" insurance for the fiduciary account CDs that I purchased. The only way for me to check (per SEC and FDIC) is to request the documentation they both want me to get.

Just out of curiousity, what is the process of being made whole once a brokered CD goes into receivership? How long does it typically take to get your money? Do brokeres advance money on a CD in receivership?


Lastly, why are some brokers so stubborn about providing something such as a master CD title?

Thanks
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Post by LadyGeek »

vst wrote:Yes, DTC is the Depository Trust Corp.
Thanks. It's now in Forum Abbreviations and Acronyms on the Bogleheads Wiki. ("Abbreviations" in the wiki sidebar menu.)
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Post by dm200 »

Like you, I stay under the OLD FDIC limit when I buy CDs for the same reasons.
That makes no sense to me. The new limit ($250,000) is in effect until the end of 2013. Then, unless Congress extends it or makes it permanent, the old limit of $100,000 goes back. SO, all you have to do is make sure that Cds with maturities after 12/31/2013 do not exceed the $100,000 level.
Just out of curiousity, what is the process of being made whole once a brokered CD goes into receivership? How long does it typically take to get your money? Do brokeres advance money on a CD in receivership?
Vanguard does not advance money, and I doubt brokers do - but I don't know about others. When the bank/thrift failure occurs, there are several ways the FDIC resolves things. They usually try to get another bank/thrift to take over. Then, there is almost no delay. The terms (rates) on the CDs at the old/failed bank/thrift might be modified or you can take out the money. If the bank/thrift completely fails, then the FDIC has to gather all the brokered CD information and consolidate it before it issues the money. During that time, the funds earn no interest. That process, typically, has taken just a few days up to about 2 1/2 - 3 weeks for Indymac.
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Post by muddlehead »

only two of my cd's mature as soon as 2013. but, they were bot before insurance limit raised. seems reimbursement has happened in a week or two. **The only way for me to check (per SEC and FDIC) is to request the documentation they both want me to get.** that does not apply when you purchase a cd through your brokerage firm. if that's a concern, only buy directly from the bank.
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no dice at Vanguard

Post by bluemonday »

I tried to find out how my Vanguard brokered CD's are held, and the rep pointed me to fdic.gov, and basicly said that no one there knew what I was talking about. Anyone holding CD's at Vanguard able to get a copy of the "title" to their CD's.
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Re: no dice at Vanguard

Post by vst »

bluemonday wrote:I tried to find out how my Vanguard brokered CD's are held, and the rep pointed me to fdic.gov, and basicly said that no one there knew what I was talking about. Anyone holding CD's at Vanguard able to get a copy of the "title" to their CD's.
I found out that most brokers (and I'm not saying anything about your broker in particular) are really dumb or just play dumb when it comes to this question about the CD title.

This is not a complex request that requires any more effort/knowledge than going to the DTC and asking them for a print screen of the CD registration as it appears in their computer system (based on my own perception of how these book entry securities are registered in street name).

I'm not sure why brokers are getting confused over this or "pretending" to be confused. The FDIC has nothing to do with getting a copy of the MASTER certificate title and making sure it's got the required Fiduciary relationship in the TITLE of the CD. The DTC should be able to honor this request with little to no effort. I feel brokers maybe stonewalling on this because they do NOT want to get a flood of requests OR they simply do not want to be bothered (in case there is an issue with the title).

If the SEC and FDIC are requiring us to do this (that's what it says on their websites), then we SHOULD demand this of our brokers.

Just take a look at what happened to the Standford investors who didn't do their due diligence or just "trusted" their broker to do their due diligence for them. Hold your broker accountable. Make it an industry STANDARD practice for them to fork over those CD titles with the trade confirmation. Either that, or get the SEC and FDIC to waive/suspend putting that responsibility on the investor's shoulders. Let the broker bear the burden of insuring the CD is titled correctly and tell the investor he will NOT be held liable if the broker or DTC screw up.
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Post by vst »

muddlehead wrote:**The only way for me to check (per SEC and FDIC) is to request the documentation they both want me to get.** that does not apply when you purchase a cd through your brokerage firm. if that's a concern, only buy directly from the bank.
Apparently it DOES apply when purchasing a CD from a broker. At least, that's what the SEC and FDIC say. I'll take their word over my broker's at this point and time. If they say we should get this documentation for our brokered deposits, then why should I just assume the risk of the title being incorrect (and thereby limiting the pass through FDIC insurance)?

As I stated above, I do not think this is a complicated or a difficult request. If anything, i think the brokers are just being lazy. They should fulfill these requests promptly. Go to the DTC and say, I would like a print screen of the registration for XYZ security. That's it. If the title of the security doesn't mention the fiduciary requirements of FDIC, fix it. It's as simple as that.
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Post by muddlehead »

how 'bout this. let's say you buy fidelity magellan mutual fund in your vanguard brokerage acct. do you think fidelity magellan knows who you are? or are they only concerned that vanguard has placed an order to buy some dollars of fidelity magellan fund - which they will then net into the rest of vanguard customers' fidelity magellan positions? so, at fidelity magellan, vanguard has a single acct number where all vanguard customers positions reside. same as cd's.
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Post by vst »

muddlehead wrote:how 'bout this. let's say you buy fidelity magellan mutual fund in your vanguard brokerage acct. do you think fidelity magellan knows who you are? or are they only concerned that vanguard has placed an order to buy some dollars of fidelity magellan fund - which they will then net into the rest of vanguard customers' fidelity magellan positions? so, at fidelity magellan, vanguard has a single acct number where all vanguard customers positions reside. same as cd's.
Who cares what the issuer knows or doesn't know. I don't care.

You're talking about something I'm not even questioning. I never said anything about the issuer "knowing" who you are (or any other investor for that matter). I (and the FDIC and SEC for that matter) am talking about the master CD registration at the DTC. I'm talking about the master CD title correctly reflecting that "CEDE & CO" is NOT the owner of the CD and that it is merely a "nominee" for its investors. That's what I'm talking about. If the title does NOT clearly spell out the fiduciary role of the agent (in this instance, Cede & Co), then the pass through FDIC insurance will not "pass through". So, if the title of the CD says "CEDE & CO" then the fdic will insure the master CD up to 250k (ignoring any amount over this limit). If the title says "CEDE & CO, as nominee for its investors", then the FDIC will allow for "pass through" insurance up to 250k per each investor who owns a "piece" of the master certificate, based on what I've researched.

You should know this if you worked in the industry for 25 years. You do know that most securities held in "street name" is actually held at DTC, right? And when they say "registered in street name" they mean it's registered to CEDE & CO as nominee, right?
bluemonday
Posts: 263
Joined: Fri Dec 05, 2008 9:26 pm

Post by bluemonday »

vst wrote:
muddlehead wrote:how 'bout this. let's say you buy fidelity magellan mutual fund in your vanguard brokerage acct. do you think fidelity magellan knows who you are? or are they only concerned that vanguard has placed an order to buy some dollars of fidelity magellan fund - which they will then net into the rest of vanguard customers' fidelity magellan positions? so, at fidelity magellan, vanguard has a single acct number where all vanguard customers positions reside. same as cd's.
Who cares what the issuer knows or doesn't know. I don't care.

You're talking about something I'm not even questioning. I never said anything about the issuer "knowing" who you are (or any other investor for that matter). I (and the FDIC and SEC for that matter) am talking about the master CD registration at the DTC. I'm talking about the master CD title correctly reflecting that "CEDE & CO" is NOT the owner of the CD and that it is merely a "nominee" for its investors. That's what I'm talking about. If the title does NOT clearly spell out the fiduciary role of the agent (in this instance, Cede & Co), then the pass through FDIC insurance will not "pass through". So, if the title of the CD says "CEDE & CO" then the fdic will insure the master CD up to 250k (ignoring any amount over this limit). If the title says "CEDE & CO, as nominee for its investors", then the FDIC will allow for "pass through" insurance up to 250k per each investor who owns a "piece" of the master certificate, based on what I've researched.

You should know this if you worked in the industry for 25 years. You do know that most securities held in "street name" is actually held at DTC, right? And when they say "registered in street name" they mean it's registered to CEDE & CO as nominee, right?
That's what Vanguard told me, all CD's they deal with are held in"street name". I called FDIC, explained my situation, and they were very adamant that I would be covered up to the FDIC limits in the event the issuer went under ( it's Chase Manhatten, so I'm not too worried there ). So, I think I'm ok, but who knows anymore.
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