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.
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
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?