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Proper Documentation for Brokered CDs?

Sunday, January 24, 2010 - 12:12 PM
Bogleheads member vst reports on the problems of getting documentation on his CD from his broker. He already has done quite a bit of research, and he has posted info from the FDIC and the SEC. As he describes, "brokered deposits are NOT cut and dry like regular direct CDs." The thread also mentions this useful CD overview at Boglehead's Wiki.
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Ken TuminKen Tumin5,467 posts since
Nov 29, 2009
Rep Points: 124,994
1. Sunday, June 10, 2012 - 3:54 PM
Has anyone been successful getting the proper documentation on Brokered CDs with Fidelity?
1
halhal4 posts since
Apr 22, 2012
Rep Points: 10
2. Sunday, June 10, 2012 - 9:41 PM
Hal:  I have purchased Brokered CDs from Fidelity for my DPs Rollover IRA for years and insist they send me documentation on each one and something showing it is FDIC insured.   I get the list of CDs they are offering and choose the one I need and then do research on the bank selling it to make sure it is a 4 -5 star bank.  Fidelity does not give information on the bank's financial status and many times I have seen them offering banks which were not in the financial shape I want my banks to be in. 

I insist they give me the city and state of the bank "before" I get the paperwork because once I buy it over the phone, I am stuck with it.   By "proper documentation" I am referring to the fact that they send me a sheet with the Cusip number and enclose a Prospectus regarding the purchase of the specific bank (named) stating it is FDIC insured and additional information on the CD.  I also get the Fidelity Transaction Confirmation with all necessary information on the CD,bank name,  amount, maturity date, yield, FDIC insured etc.  I cannot think of any other information you may be referring to and this seems more than enough for my records.

The only problem I have with Fidelity brokered CDs now is that due to the low interest rates, their CDs seem even lower than ones I can buy from outside banks or Credit Unions.  However, the IRA is with Fidelity so I just bite the bullet and use their brokered CDs anyway for just their IRA.  I don't buy them for anything else.  Hope this helps.
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paoli2paoli21,364 posts since
Aug 10, 2011
Rep Points: 5,972
3. Sunday, June 10, 2012 - 9:56 PM
Hal:  I reread the above post and rechecked what I was sent recently on a CD I purchased from Fidelity.  In the Confirmation it does give the bank's name and states "We have acted as Principal.  CTF Dep FDIC insured ACCDG to Rules/Regs Act/365 etc. etc.   then Prospectus under seperate cover.

I will call Fidelity tomorrow to make sure the CDs are protected and their recordkeeping is as it should be.  I know recently one of the banks we had failed and the money went back into the Fidelity cash account so I could instantly repurchase another CD.  No problem at all.  I just don't think Fidelity would send me paperwork stating the CD I purchased is FDIC insured if they had some concern it wasn't.  However, it can't hurt to double check.  Thanks!
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paoli2paoli21,364 posts since
Aug 10, 2011
Rep Points: 5,972
4. Sunday, June 10, 2012 - 10:11 PM
Hal:  Sorry to be bothersome about this but I just remembered what I was told when I first started buying brokered CDs from Fidelity and I called the FDIC to verify.  I was told I just had to make sure Fidelity put on my information for that bank that it was FDIC insured.  I also had to know the exact name, city and state of the bank to make sure I did not have over the maximum for the FDIC insurance for CDs with that same bank.  I could not go over the FDIC limit because if the bank failed, the FDIC would add up ALL the CDs I or we had with that specific bank even if they were with Vanguard etc. and we could only be insured for the maximum coverage.  This is why "I" keep my own records and check them before I make a new purchase so that I don't buy too many CDs with the same bank.   I was not told by the FDIC that Fidelity had to do anything other than let me know the CD was insured.  It seems the important record keeping was to be done by us.   I think Fidelity probably only sells so many of one bank's CDs so they can stay within the FDIC rules but I have never been told this.  If a bank fails, "we" have to know if we bought too much from that one bank, imo.  Thanks for bringing this to my attention.
2
paoli2paoli21,364 posts since
Aug 10, 2011
Rep Points: 5,972
5. Monday, June 11, 2012 - 9:32 AM
I called the FDIC and Fidelity this morning.  I was advised that Brokered CDs are basically under the same rules as regular CDs we purchase from the banks ourselves.  WE have to keep good records to make sure we don't go over the insurance limit for the categories we are allowed.  Our brokerage does not need to have this information unless they are choosing the banks for us.  The paperwork I get from Fidelity meets all the requirements the same as if they were giving me the type of CD banks do.  BTW, I have done business with credit unions who do not give CD type paperwork.  I was told to go on the internet and  print out whatever I needed for my records.  So in a nutshell, the responsibility is still on "us" to keep good records.  Have a nice day!
3
paoli2paoli21,364 posts since
Aug 10, 2011
Rep Points: 5,972
6. Monday, June 11, 2012 - 4:27 PM
I TOO HAVE BROKER CDS  5 PERCENT WITH CAPITAL AND LIVE THE GOOD LIFE IN IDaho can any1 say big sky country
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algonkwynnalgonkwynn2 posts since
Jun 11, 2012
Rep Points: 18
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