Merrill Edge represents the brokerage arm of the Bank of America (BOA), providing wealth management solutions to its customers. So, while deposits in the parent company, BOA, are FDIC insured, Merrill Edge customers are protected in a different way.
Merrill Edge is not FDIC insured. However, accounts registered with this broker are SIPC insured. Unlike FDIC insurance, SIPC insurance protects up to $500,000 in equity and about $250,000 in cash. Customers who exceed this limit are covered by the Llyod’s of London policy.
Are Merrill Edge Accounts FDIC Insured?
Accounts with Merrill Edge are not FDIC insured because they do not fall under the umbrella of traditional bank deposits. Only bank deposit accounts are protected by this body. Hence, investment vehicles such as stocks, mutual funds, bonds, and life insurance agreements cannot be protected by the FDIC body.
Why Is Merrill Edge Not FDIC Insured?
Merrill Edge is not FDIC insured because it is not a financial deposit. Investment instruments in any form are not insured by the FDIC. This includes even those that are acquired through a bank’s investment arm, as in the case of Merrill Edge.
When you invest your money, you’re undoubtedly signing up to bear the risk it may accrue. For instance, if your investment falls by the wayside, you alone will bear the brunt of it. And it’s this understanding that makes investing a risky venture, a lot like gambling.
So, when you embark on this risky venture, you will not be protected by the FDIC. It’s the same way an online gambler will not be paid back his money if he loses a bet. As an investor, you’re aware that everything could go south and you may lose all your money. This is unlike someone who only deposits his money in the bank.
Is Your Money Safe At Merrill Edge?
Merrill Edge is generally thought to be safe. This is because it exists as an arm of the Bank of America, which has an unsullied reputation and a long track history of excellent service.
This brokerage firm is regulated by the Financial Industry Regulatory Authority (FINRA) and the Security Exchange Commission (SEC). They also periodically disclose their financials, hence, providing transparent service delivery to investors.
Are you worried about the money you invested in the event that this broker becomes insolvent? Recall that the SIPC insures the money you invest in Merrill Edge in the event that it fails. It provides about $500, 000 in coverage and $250,000 in cash. If this amount is surpassed, they will be covered by the Llyold of London policy.
But even before the SIPC steps in, the law demands that a broker should keep the investors’ money in an account separate from theirs. The law also states that a brokerage firm should always have a minimum of liquid assets on hand. This amount is what they can use in the event of an emergency.
So if your broker fails, your money is transferred to a different brokerage firm that is SIPC insured. All of this should take place before the SIPC steps in. So the SIPC only steps in if your money is not transferred.
At this point, I don’t have to tell you that you should only invest your money with brokers that are SIPC insured. Merrill Edge is SIPC insured. If you want to determine if your broker is SIPC insured, you may simply scroll to the bottom of their site. Their SIPC membership should be displayed there at the bottom.
What Types Of Accounts Are FDIC Insured?
The Federal Deposit Insurance Corporation (FDIC) typically insures accounts that fall into the financial deposits category. These are deposits made by customers in traditional banks. If the bank fails, customers will be paid the amount they deposited in the bank.
As long as your bank is FDIC insured, your account will be insured if it falls under one of the following types of deposit account.
- Savings accounts
- Checking accounts
- Cashiers check
- Money market deposit accounts
- Money orders
- Certificates of deposit (CDs)
- Business accounts
How Can You Get FDIC Insured?
Being FDIC insured requires no active effort from a depositor. Depositors become automatically FDIC insured when they register a deposit account with a bank that is FDIC insured. So, in retrospect, the only effort that is required of a depositor is to determine if the bank they want to open a deposit account with is FDIC insured.
Customers should also check that the money they deposit does not surpass the insurance limit for that particular deposit account.
How Does FDIC Insurance Work?
When an FDIC-insured bank fails, this government agency reimburses the depositors’ money up to the insurance limit. They are also paid the interest earned on that deposit. Typically, depositors can expect their money within days of the bank declaring insolvency. This is often the following business day.
The FDIC reimburses depositors in two ways. First of all, it may send depositors’ money into a new account at a different bank, albeit insured. It transfers the amount of money deposited at the insolvent bank with interests due to the account.
Conversely, the FDIC may issue depositors a check containing the amount they deposited in the failed bank. Deposits that are in excess of $250,000 may take more time to dispense. This is because deposits exceeding this amount may be tied to trust documents developed by a third-party brokerage firm.
Therefore, the FDIC takes some time to review these accounts and ascertain the amount of insurance obtainable for them. The time spent depends to a large extent on the time it takes depositors to provide the FDIC with additional information.
Investors’ money is not protected by the FDIC. However, they can rest assured because, in the event of their broker failing, there are several laws to protect their investment.
These bodies and laws, however, do not protect investors from investment losses. They also do not shield you from investments made with brokers not registered with the Security Exchange Commission (SEC).
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