Robinhood is one of the leading trading platforms that has disrupted the stock brokerage industry with its commission-free trading offerings. Since its inception in 2013, it has enjoyed tremendous growth and has amassed over 22.5 million accounts. Robinhood's financial bows and arrows gain so much attention that every trader gets attracted to it.
But some recent events have worried many young investors about what will happen if Robinhood goes bankrupt. And to be honest, currently, Robinhood is doing very well financially.
Many new investors who want to join Robinhood always consider its history and current situation and wonder what will happen to their hard-earned money if Robinhood shuts down.
So in this blog, we will discuss it and address all the common concerns related to the Robinhood shutdown that arises among many investors today.
Let's find out..!!
How Do Robinhood Insure My (Customer) Assets?
Look, there is no doubt that our money is safe with Robinhood. Robinhood adopts several safety measures so that its customer's assets are not affected at all. The commission-free trading app is a member of the Security Investment Protection Corp (SIPC) and, therefore, is insured by the SIPC. If the case arises related to bankruptcy or any financial crises or market challenges, it always covers financial service companies.
If Robinhood shuts down the Security Investment Protection Corp (SIPC) will cover up to $ 500,000 in each client's assets. SIPC will cover you both in terms of assets and cash. For assets, they provide you a cover of $ 250,000, and for cash, they provide the cover of $ 250,000.
So, except for the millions worth of assets invested by Robinhood. SIPC protection will be there, you will be well covered by SIPC. About millionaires who are well immersed in the free trading company offers.
Robinhood is not only covered under the protection of SIPC but also insured by the Federal Deposit Insurance Corporation (FDIC). FDIC not only secures every deposit in Robinhood but if the case of bankruptcy is there, it will provide the cover up to $ 250,000 in personal losses.
How are My Assets in Robinhood monitored?
Whenever you make a transaction with Robinhood or deposit your money in it, your money has been sent to the special account of Robinhood which is not used in the company itself. So from here, one thing is clear that your money will be kept separate from Robinhood money. So if the situation arises of Robinhood falling, your money will be safe.
The Financial Industry Regulatory Authority (FINRA) imposed this rule on all financial services companies to ensure the complete safety of the customer's assets. Even it enforces the financial services companies to bail with their own money without using customer's deposits and customer's assets. And if any company violates this rule, FINRA imposes fines on those companies and even charges them for fraudulent ways under the defaulter act.
How do I get My money's worth if Robinhood Shut Down?
If Robinhood is getting down, you don't have to worry about it. After filing a petition about Robinhood shutting down, SIPC will take action with the court-appointed committee of trustees.
Both the trustee and SIPC will work together to obtain court approval and facilitate the release of the assets. Once everything is settled, your deposited money will be handed over to you through ACH, etc. the well-known channels.
And if we talk about the assets, the value of your property will be calculated based on market closing prices on the day the petition is signed and filed in court. Here you don't have to worry about the losses, everything will be evaluated from every angle. But always remember that you buy the property for a much higher price than the price you closed that day.
There is no time limit to return the property, SIPC guarantees customers that their assets will be paid for within a set period till then you have to wait for it. So, you need not worry about your money or assets pending with the court for years.
Addition Security in Robinhood
To protect customers' money and assets, Robinhood works under the authority of the Financial Industry Regulatory Authority (FINRA). They help the investors in:
- Writing and enforcing the rules governing the ethical activities of all the registered broker-dealer firms and registered brokers in the US.
- Checking companies for compliance with those rules and regulations.
- Increasing market transparency which helps the customers in information flexibility.
- Provide complete education to investors about the market.
Words of Worth
You might be worried about what happens if Robinhood shuts down, how do you get your money back, how do you collect your assets, let me tell you there is nothing to be worried about this. Your assets are completely secured by the SIPC. SIPC insures all the customer assets owned by SEC-listed financial services companies, and Robinhood is one among them.
If any event regarding bankruptcy happens SIPC and FDIC combine will repay you up to $750,000 in assets.
Always remember, it is a dynamic market, and just like any other company Robinhood also has the potential to go bankrupt, but you don't have to worry about it. But one thing I must say is of huge concern is that the SEC is reviewing and threatening to ban payments for its main source of revenue, order flow.
But again I am saying there will be no damage to your assets and your money. There is a higher authority that will take care of all your transactions and investments. You just need to take care of your investment decisions, because at the end of the day it is your decision that will take you up or down. So take your investment decisions responsibly.