[ad_1]
Regulators have asked online wealth advisor Betterment to clarify certain details regarding their new chequing and savings accounts just hours after their launch.
The start-up of the digital wealth management has unveiled new accounts with an annual return of up to 2.69%. However, two people familiar with the conversation asked Betterment to provide more details to one of its regulators almost immediately after public release.
Although the content of the questions from the Financial Regulatory Authority, or FINRA, was unclear, Betterment had contacted the agency, as well as the Securities and Exchange Commission, in the month before the launch. of Tuesday, said a person. On Wednesday, the company did not change the details of the product or its labeling.
The double catch of the watchdogs highlights the complexity and uncharted territory of the launch of new banking type products in a highly regulated sector. Betterment is not a bank – it is regulated by the Securities and Exchange Commission as a broker and is a member of FINRA. He is also a member of the Securities Investor Protection Corporation, known as SIPC.
"As a policy, Betterment does not comment on regulatory issues," a spokesperson for Betterment told CNBC.
To launch banking-type services, Betterment needs to partner with banks that actually hold client deposits and benefit from FDIC insurance. This is a current configuration for financial technology companies offering financial services but not having a bank charter. Customer deposits for Betterment will be held at Citi, Barclays and Valley National. Check-like accounts are insured up to $ 250,000 by the FDIC, while savings accounts are insured up to $ 1 million, according to Betterment.
The Securities and Exchange Commission declined to comment and FINRA did not immediately respond to CNBC's request for comment.
Financial services regulators are on alert after the popular millennium-wide application of stock trading, Robinhood, missed the launch of its own current account last year. Robinhood has announced plans to launch a product with a 3% interest rate, the most advantageous in the industry. The start-up did not contact the SEC or SIPC before the launch, told the Stephen Harbeck channel, the SIPC manager, at CNBC at the time. Just a day later, Robinhood came back on the product and said that he was renaming it and relaunching it. A new version of the product is still in preparation, according to a Robinhood spokesperson.
In response to the launch of Robinhood, US Senators sent a letter to SEC President Jay Clayton saying that they "feared" that financial technology companies would escape regulatory oversight. They asked the American financial supervisors how they plan to control new companies that are setting up on the banks' territory.
"We would like an update on how the SEC, FDIC and PCIS are carefully monitoring financial companies that intentionally or unwittingly blur financial products to gain a competitive advantage," Senators wrote. "Competition should not be at the expense of customer clarity and everything should be done not to mislead customers."
Other fintech companies have launched similar products in recent months. Since February, Wealthfront has opened a cash account. Since then, his deposits have reached $ 1 billion. The interest rate on his current account has recently been raised to 2.57%. Fintech, SoFi and Acorns start-ups also have accounts receivable.
There are some caveats regarding Betterment's interest rate. The 2.69% higher APR is only available if you also register for the current account and is only guaranteed until the end of this year, according to the company's website. Without a promotional offer, the APR on the savings account is 2.43%. The TAP is also a "variable rate" and can change at any time. Chief Executive Officer Jon Stein told CNBC that as partner banks adjust to the widely discounted Federal Reserve interest rate cut, he "would expect" that the Betterment rate also readjusts.
Source link
