I plan to open an account with an investment manager that uses a custodian bank. I will deposit over $1 million in cash, which the investment manager will put into various securities. The bank says that custodial assets are not commingled and would be returned in full the next day if the bank became insolvent. Is this right? It also says that cash accounts have only $100,000 in FDIC insurance. Does this mean that if the bank becomes insolvent before the investment manager uses the bulk of the cash to buy securities, I could lose all cash above the $100,000 insured amount?
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Consult your contract documents concerning your rights to any securities held for your account. Funds on deposit in an FDIC or NCUSIF insured institution are insured to a limit of $250,000 per depositor, including any other sums you have deposited at the same bank as an individual. The insurance limit was temporarily increased by Congress, through 12/31/2013. After that date, the limit will revert to $100,000 unless Congress makes another change.
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Consult your contract documents concerning your rights to any securities held for your account. Funds on deposit in an FDIC or 