Investing

Is Fidelity Safe For Investors To Use?

Javier Simon

Published: April 26, 2024 2:00 pm

Fidelity Investments is one of the nation’s largest brokerages and has been providing financial services since 1946. It’s registered with government regulators like the SEC and a member of the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange (NYSE), and the Securities Investor Protection Corporation (“SIPC”).

Fidelity serves more than 50 million individuals and administers more than $12.6 trillion in assets.

How does Fidelity protect my assets?

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Fidelity Investments participates in a Customer Protection Guarantee program. This means it would reimburse you for any losses due to unauthorized activities in covered accounts.

These include the following.

• Brokerage accounts
• Fidelity crypto accounts
• 401(k) plans
• 403(b) plans

Moreover, Fidelity uses the latest technology to protect your personal information and prevent fraud.

Are Fidelity accounts covered by the SIPC?

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All Fidelity brokerage accounts are covered by the Securities Investor Protection Corporation (SIPC). Should Fidelity Investments fail due to financial hardship, the SIPC covers up to $500,000 in securities including stocks, bonds, mutual funds, exchange-traded funds (ETFs) and money market funds. Coverage also includes $250,000 in cash held in brokerage accounts.

But it’s important to know that the SIPC does not cover investment losses due to market conditions.

And SIPC coverage doesn’t apply to commodity futures contracts or precious metals like gold and silver. Coverage also doesn’t extend to investment contracts like limited partnerships and fixed annuity contracts not registered with the SEC under the Securities Act of 1933.

Is Fidelity FDIC insured?

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Cash held in some Fidelity accounts may be FDIC insured as part of a cash sweep program.

Here’s how it works. Cash balances held in certain Fidelity accounts like IRAs and Roth IRAs are swept into one or more FDIC-Insured, interest bearing accounts at one or more program banks.

The FDIC insures up to $250,000 in a cash deposit accounts at a FDIC member bank.

So up to $245,000 of eligible cash would be swept into one of about 20 program banks. Deposits exceeding this amount would be swept into another partner bank. This means you could essentially multiply your FDIC coverage to $5 million.

Eligible accounts in the cash sweep program include the following.

• Fidelity cash management accounts
• Traditional IRAs
• Roth IRAs
• SEP IRAs
• SIMPLE IRAs
• Fidelity health savings account (HSA)

But keep in mind this applies to cash in these accounts. In other words, the stocks held in your Fidelity brokerage account won’t be FDIC insured.

Moreover, covered cash in excess of FDIC or cash sweep program limits would be swept into the Fidelity Government Money Market Fund, which enjoys SIPC protection.

Why this matters

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In light of recent uncertainty in the banking industry and widespread financial fraud, it’s important to make sure your money is safe where you park it. And even though certain industry regulators set consumer protections at banks and brokerages across the country, not all institutions are equipped to protect your cash. This is why we examined the protections that exist within Fidelity Investments.

If you want to learn more about Fidelity, check out our regularly-updated list of Fidelity Investments guides, news and coverage.