SearchTerms and Conditions
for the Insured Deposit Program
NOTICE: On May 20, 2009 the termination date for the increase in FDIC deposit insurance from $100,000 to $250,000 per depositor was extended from December 31, 2009 to December 31, 2013. There is no change in the insurance for IRAs and other certain retirement accounts, which remains at $250,000. Until December 31, 2013, all references to “$100,000” in the Terms and Conditions for the Insured Deposit Program shall be deemed to be “$250,000,” and all references to “$1,000,000” in the Terms and Conditions for the Insured Deposit Program shall be deemed to be “$2,500,000. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.”
This document contains important information about the Insured Deposit Program (the “Program”).
These Terms and Conditions supplement the account agreement (“Customer Agreement”) that you executed with your brokerage firm (“we” or “us’) with respect to your brokerage account (your “Brokerage Account”) and provide additional terms and conditions that apply to your Brokerage Account with respect to your participation in the Program. The availability of funds for making payments and withdrawals or transfers from your Brokerage Account are governed by the provisions of your Customer Agreement. Your brokerage firm may impose holds and limits on the availability of funds from your Brokerage Account. You should review your Customer Agreement for more information.
1. Sweep Program
We (your brokerage firm) offer the Program to you. The Program provides for the automatic transfer (“sweep”) of cash balances in your Brokerage Account into bank deposit accounts established and maintained at selected banks for the benefit of our customers. By selecting the Program as your sweep vehicle, you have appointed us as your agent to make deposits to and withdrawals from those bank accounts and otherwise to act on your behalf with respect to the Program.
We utilize Deutsche Bank Trust Company Americas (“DBTCA”) to provide certain services with respect to the operation of the Program. By selecting the Program as your sweep vehicle, you agree that we, as your agent, have appointed Penson, our clearing firm, to act as our agent for certain of our deposit and withdrawal responsibilities set forth in these terms and conditions (the “Terms and Conditions”).
We will place your cash sweep money in an FDIC-insured money market deposit account at a depository institution (“Program Bank”). Individual, business, corporate, joint, gifts-to-minors and retirement accounts are all eligible and included.
Each cash sweep from your account is a deposit in a Program Bank and that deposit is solely the obligation of the Program Bank. We act only as agent for you, the depositor. In the event any Program Banks participating in the Program reject any additional deposits, withdraw entirely from the Program, or are terminated from the Program by us, then we, as your agent, are authorized by you to move your deposit to another FDIC-insured depository institution. In the event we are unable to make such alternate arrangements we will transfer your balance to your Brokerage Account (as what is called a “free credit”) and we will notify you of such action.
Cash balances deposited into the Program Banks are not covered by the Securities Investor Protection Corporation ("SIPC"). Instead, all cash deposits by account type in the Program are fully covered by insurance from the Federal Deposit Insurance Corporation (“FDIC”), up to certain amounts.
2. FDIC Insurance for Your Account
The Program accounts at the Program Banks are insured, up to the maximum amount permitted by law, by the FDIC, an independent agency of the U.S. government, in the event a Program Bank fails.
For the purpose of FDIC insurance, all of your accounts at each Program Bank of the same account type are counted together. For example, all IRAs for an individual are counted together toward the retirement account FDIC insurance limits, and all of a person’s individual accounts (including for example accounts held as a sole proprietorship) are counted together toward the non-retirement account FDIC insurance limits. But accounts of different types (such as an IRA account, a corporate account, and a joint account) are not aggregated with each other for purposes of these limits.
Each account type is aggregated with all other deposits held by you in the same capacity at the same Program Bank, and the total at the Program Bank, per account type, is insured to a maximum amount of $100,000 ($250,000 for retirement accounts), including principal and accrued interest to the day the Program Bank is closed.
Your funds become eligible for deposit insurance immediately upon placement in a Program Bank deposit account by us as agent for you under the Program. While in transit from us to the Program Banks and from the Program Banks to us, the funds pass through our intermediary bank, currently Deutsche Bank Trust Company America (“DBTCA”). While at DBTCA such funds are also eligible for FDIC insurance, to a maximum amount of $100,000 ($250,000 for retirement accounts), per account type, when aggregated with any other deposits held by you in the same capacity at DBTCA.
An individual bank can only provide FDIC insurance of $100,000 per account and $250,000 for retirement accounts. If, for example, there are 10 Program Banks into which your funds have been placed, FDIC insurance protection is available up to $1,000,000 for accounts and up to $2,500,000 for retirement accounts.
If your funds are deposited into a Program Bank in which you already hold one or more deposit accounts outside your Brokerage Account, in the same capacity in which you hold your account with us, balances in those accounts will be aggregated, for the purpose of FDIC insurance coverage, with your interest in the Program accounts at the same Program Bank. Therefore, you may wish to exercise your right to instruct us not to deposit any of your funds to such a specific Program Bank. You are solely responsible for monitoring your FDIC insurance coverage. Please refer to the attached list of Program Banks and contact your individual broker if you would like to opt out of any of the Program Banks for any reason. Through our agent, we will convey your opt out instruction to DBTCA for implementation.
If your funds exceed the capacity of the Program Banks to provide deposit insurance, your excess funds will be swept, pro rata, into the Program Banks, with such excess not covered by FDIC insurance. We intend to continue to work to increase the FDIC insurance available under the Program by adding additional Program Banks in order to exceed the amounts currently available.
You can get publicly available financial information concerning any or all of the Program Banks at http://www.ffiec.gov/nicpubweb/nicweb/nichome.aspx and more detail on FDIC
insurance from http://www.fdic.gov/deposit/index.html or by contacting the Federal Deposit Insurance Corporation (“FDIC”) Public Information Center by mail at 3501 North Fairfax Drive, Room E-1002, Arlington, VA 22226 or by phone at 1-877-275-3342.
It is possible that your funds in transit at DBTCA will exceed, during a day or sometimes overnight, the maximum amount of FDIC coverage available through DBTCA as an individual bank; therefore the amount that exceeds that amount may not be covered by FDIC insurance until such funds are remitted to Program Banks.
3. Our Status and that of the Program Banks
All Program Banks in our Program are depository institutions duly chartered under the laws of the United States or a State thereof, the deposits of which are insured by the FDIC. We are a broker-dealer registered with the SEC, and we are not a bank. Program accounts are held by the respective Program Banks, not by us. Program accounts are not covered by SIPC insurance.
All questions regarding your account should be directed to us and not to the Program Banks. By your continued use of the Program, you agree to the terms provided herein. We may change these terms upon notice to you. Your continued use of the Program after the expiration of the time period set forth in such notice shall deemed to be your agreement to the changes set forth in the notice. We may, without notice, refuse any deposit, close any account or impose a fee, if your actions become administratively burdensome.
4. Deposits
There is no minimum initial deposit.
Through the Program, excess cash balances in your Brokerage Account will be automatically deposited in FDIC-insured depository institutions. Each business day we will deposit the excess cash balances in your Brokerage Account into one or more omnibus deposit accounts maintained at the Program Banks. The omnibus deposit accounts at the Program Banks are held in the name of “Penson as Agent for its Introducing Broker-Dealers, acting as Agents for the Exclusive Benefit of their Deposit Customers, Acting for Themselves and Others.” Your beneficial interest in the account will be evidenced by an entry on records maintained by the clearing firm and DBTCA for each of the Program Banks at which your funds are on deposit. You will not receive a passbook or a certificate.
All transactions involving your Program account must be made through us. However, your Brokerage Account statement will reflect all deposits, withdrawals, Program Bank deposit balance(s), and interest rate. One of the services provided by DBTCA is to allocate your deposits in order to make certain that no more than $100,000 of your Program funds ($250,000 for retirement accounts) will be deposited in any single Program Bank until all of the Program Banks hold the maximum amount that may be insured. Thereafter, your excess funds will be allocated pro rata among the Program Banks with such excess not covered by insurance.
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The list of Program Banks participating in the Program is attached. This list will be updated from time to time and the updated list will be available on our web site. You may exclude any Program Bank from being able to receive amounts from your Program account at any time. We will inform you which Program Bank(s) your account is deposited in on your monthly statement. We reserve the right to choose the priority of Program Banks in which your funds will be placed. Further, we reserve the right to include additional Program Banks, as well as delete Program Banks. You will receive notification from us in advance of changes in the Program Banks.
5. Withdrawals
All withdrawals necessary to satisfy debits in your Brokerage Account or transaction accounts will be made by us as your agent. A debit will be created, for example, when you purchase securities or request a withdrawal of funds from your Brokerage Account or when you write a check, or otherwise withdraw funds (such as through an ACH). Checks written on your Brokerage Account are not drawn directly against the amounts deposited for you at any of the Program Banks, but the money is transferred back from the Program Banks to our intermediary bank (DBTCA) and then to us, and then used to satisfy the debit in your Brokerage Account.
The funds necessary to satisfy debits in your Brokerage Account will first be obtained from free credit balances in your Brokerage Account (if any), and then withdrawals will be made from the Program.
In addition to determining the Program Bank to which your deposits should be made, DBTCA also determines from which Program Bank to make the necessary withdrawals of your funds. Although no Program Bank has exercised its right to require at least seven days’ notice of an intended withdrawal, each may choose to do so. No further deposits will be made to a Program Bank that exercises this right.
6. Interest
Funds deposited by us into the Program will begin earning interest from the day they are placed into the Program. Interest on funds in the Program will accrue daily and be credited to your Brokerage Account monthly. Interest begins to accrue on the day of deposit and up to, but not including, the day of withdrawal. This method applies a daily periodic interest rate based on the balance level in the Program account. The daily rate is 1/365 (or 1/366 in a leap year) of the interest rate. 1099-INT forms will be sent to you indicating the amount of interest paid to your Program account by Program Bank(s).
The rate will be established periodically by us based on prevailing market and other business conditions and will vary depending on the balance in your account. A Program Bank may lower its interest rate if it is subject to an increase in the insurance premium it must pay to provide FDIC insurance. Current interest rate information is available on our website and by contacting your individual broker.
7. Fees.
No direct fees will be assessed to you or deducted from your specified rate of return. Instead, fees are collected directly from the Program Banks. The fee of the intermediary bank (DBTCA) will be collected from the Program Banks in the form of fees collected in addition to interest paid on the Program accounts. We will receive a fee that varies depending on the interest paid on the Program accounts – the more interest paid to you the less we earn. Under our agreement with DBTCA, the program sponsor, we would expect that the total amounts available for interest and fees would be based on the Federal Funds Effective Average Rate (the rate for deposits in U.S. Dollars most recently published at: http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt on the website of the Board of Governors of the Federal Reserve System. The actual amounts paid as interest on the Program accounts are subject to change and vary depending on other factors. This fee is subject to change and we may also waive all or part of this fee. Other than applicable fees imposed by us on a Brokerage Account, there will be no charge, fee or commission imposed on your account with respect to the Program. Wealso receive distribution (12b-1), service fees and other compensation as a result of sweep investments in money market mutual funds, an alternate sweep vehicle we offer. However, the Program will usually be more profitable to us than a money fund.
8. Account Information
Activity with respect to your Program account, including the Program Banks in which your Program account is invested and the interest rate paid to you, will appear on your periodic Brokerage Account statement. You may contact your individual broker to obtain information about your Program deposits, including balances held on the books of each Program Bank, activity in the account, and the current interest rate paid to you.
You must notify us and the clearing firm immediately of any discrepancies noted on your account statement (including unauthorized account activity and any other complaints) and in no event later than ten (10) days after the date of the account statement on which the problem or error first occurred.
9. Summary of Certain Relationships
We will act as your agent with respect to all transactions related to your interest in any Program. No Program Bank will accept any instructions concerning your interest in a Program account on deposit in a Program Bank through a Program account under the Program unless such instructions are transmitted by us or an authorized agent on our behalf. We will assume the responsibility of delivering your funds to the deposit account (the “Settlement Account”) maintained by us at a bank (the “Settlement Bank,” which shall be DBTCA unless another bank is designated by us) that we have designated for the purposes of transmitting funds from us to the accounts at the Program Banks and transmitting funds to us from the accounts at the Program Banks. Withdrawals will be deemed paid by a particular Program Bank when such funds are transmitted by such Program Bank to the Settlement Account and such Program Bank will be released from all liability for such withdrawn funds once the Program Bank delivers those funds to the Settlement Account. The Program Banks are not responsible for the actions of DBTCA or us with respect to the Program or otherwise.
10. Alternatives to the Program: By your enrollment in the Program, you agree to the terms provided herein. You understand that, at any time, you may withdraw your consent to participate in the Program. If you withdraw your consent or if the Program is terminated, and you do not designate a replacement automatic cash investment option for your Brokerage Account, we will have the right to maintain such funds as cash, pending your investment instructions, and, to the extent permitted by applicable law and regulation, to transfer the funds to a money market fund or another FDIC-insured sweep program.
You may wish to compare the terms, rates of return, required minimum amounts, charges and other features of our Program with other bank accounts and with investment alternatives at other brokerage firms.
11. Waiver of Confidentiality
You expressly give consent for federal or state regulators to access your customer account information for audit and review purposes.
LIST OF PROGRAM BANKS
PLEASE NOTIFY YOUR BROKERAGE FIRM IF YOU DO NOT WANT YOUR FUNDS DEPOSITED INTO ANY ONE OR MORE OF THE FOLLOWING PROGRAM BANKS
DEPOSIT BANKS FOR PENSON
March 3, 2010
Associated Bank WI
Bay Cities Bank FL
Blackhawk State Bank WI
Deutsche Bank NY
Evolve AR
Gateway Bank IL
Penn Security Bank PA
Plains Capital Bank TX
Pulaski Bank MO
Union Bank of CA CA
Zions Bank UT
Last update 9/2010