INVESTOR BULLETIN: Bank Sweep Programs

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Company Filings More Search Options. This Investor Bulletin describes some of the potential risks associated with bank sweep programs and suggests questions you may want to consider asking your broker-dealer to help you decide how to best manage the cash in your brokerage account.

Broker-dealers may offer you several options for managing your cash. Other options include leaving cash in the brokerage account, or sweeping cash to one or more money market mutual funds. This investor alert focuses only on the first option: The terms and conditions of bank sweep programs vary. The protections for cash at a bank primarily will derive from banking laws and regulations, including FDIC deposit insurance.

You should review your brokerage account agreement and statement to determine if you are participating in a bank sweep program for your cash. Beginning in Marchyour broker-dealer must obtain your written consent to participate in a bank sweep program for any new account you open. If the description of the bank sweep program is not clear to you, you may want to consider asking your broker-dealer to explain how its bank sweep program works.

You also may want to consider asking your broker-dealer about other options for your cash as well as the return offered, risks and costs of each option.

If you decide to change your cash sweep option, ask your broker-dealer how to do that. Generally, you may liquidate your bank sweep account at any time and have the proceeds returned to you or placed in your brokerage account. FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. You can determine how much cash is in your bank sweep accounts from your brokerage account statements or by contacting your brokerage firm.

You should also be aware that most broker-dealers place the responsibility on you to monitor your cash level so that you do not lose FDIC insurance coverage. If offered by your broker-dealer, you may want to sign up for any alerts or other forms of notification about FDIC insurance coverage levels to enhance your ability to monitor the FDIC insurance protection of your cash. Your broker-dealer may choose the bank s in its bank sweep program for various reasons. As a result, the bank may not have been chosen solely with your interests in mind.

You may have a say in where your cash is deposited, and if you have concerns about the relationship between the bank and your broker-dealer, you may wish to investigate another option than the bank sweep program. One relevant consideration when assessing the health of the bank may be the percentage of deposits derived from concentrated sources such as brokered deposits or one or more bank sweep arrangements. You may want to review bank sweep program details to understand how your broker-dealer, the bank sand any other administrators of the sweep program get paid for the sweep program.

You can ask your broker-dealer representative to provide you with details of these compensation arrangements. Most broker-dealers keep a portion of the interest paid by the bank s as a fee for providing bank sweep services. This fee reduces the rate of interest you receive on your cash in the bank sweep program. You can check with your broker-dealer to determine if there are other cash management options available to you that may provide a higher rate of return for your cash.

In determining the best option for your cash, please remember to carefully consider the costs, risks and benefits of each option. Securities and Exchange Commission. Investor Alerts and Bulletins. What is a bank sweep program? How do I know if I am participating in a bank sweep program? Does FDIC insurance cover the cash in bank sweep programs? What relationship does my broker-dealer have with the deposit bank s?

Public Information about the health of the bank. The compensation arrangement between the bank and your broker-dealer.

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