IB questions to def

JamesBarr,

I thought you raised some very valid questions. I'm not sure why Def thought the insurance issue was not for public consumption but I would like to know what you found out.

Ib does not sweep cash deposits to a MM fund but instead pays interest on them. In effect, it is a very cheap way for them to fund overnight cash needs at MM rates, which are no doubt much lower than IB would pay a bank. I'm not suggesting there is anything wrong with the practice, Preferred does it too, but obviously IB is not as solid a credit as a MM fund. Thus the insurance issue is very important if one has an account greater than SIPC insures.
 
The only problem with the SIPC is that you will never get your money back, especially when IB does not send you any paper, excluding the annual 1099. Yes, the SIPC claims that you are *guaranteed* to get your money back if the broker should default or steal, but unless you have a really really good paper trail, there's no way. Also, in the event that IB did go under, or its executives move to Rio with their customers funds, the SIPC's primary concern would be to recover your money back from the broker, which can take years, during which time you are without your cash. SIPC is really not your friend.

I have been looking for a private surety bond to secure any cash I have in my IB account, but from what I've found on the net, it seems that most insurers only want to insure brokers.

If anyone knows where one can procure a bond IN PLACE of SIPC coverage, please post it, or send me a private message.

IMHO, the best solution to this problem is to keep slightly more than 25K in your equities account, and wire out the excess whenever it hits a certain point, i.e. 30K.

I don't mean to single out IB or to suggest that they would ever do anything to jeopardize their customers' money - I think they're fantastic.

If anyone knows about private bonds, please lemme know.

Ken
 
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