Addressing common questions related to Silicon Valley Bank failure, including FDIC v SIPC and more.

What is the difference between a bank and a broker-dealer? Fidelity serves customers through multiple businesses, including operating as a brokerage firm. As a brokerage firm, our accounts are covered by Securities Investor Protection Corporation (SIPC). Fidelity also offers certain investments or programs in banks not affiliated with Fidelity that provide Federal Deposit Insurance Protection (FDIC) coverage. SIPC coverage protects assets held in brokerage accounts, including stocks, bonds, mutual funds, and money market funds, while FDIC coverage protects deposit accounts at banks including checking accounts, savings accounts, money market deposit accounts, and certificate of deposit (CD) accounts. (See details below) It may be helpful to know that brokerage firms are required to follow certain rules that are designed to minimize the chances of financial failure and, more importantly, protect customer assets if they do fail. Some of these rules require brokerage firms to maintain certain levels of their own liquid assets, while others require that when having custody of customer assets, they keep those assets separate from their own accounts. In other words, customers’ cash must be placed in a special, separate “reserve” account; and fully paid customer securities must be kept separate from firm and customer margin securities.

What is the difference between FDIC vs SIPC? FDIC What is FDIC insurance? The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the federal government that insures cash deposits at FDIC member banks, generally up to $250,000 per account.1 How does FDIC insurance work at Fidelity? Fidelity offers an FDIC Insured Deposit Sweep Program for Cash Management, HSAs, and most IRAs. Cash balances in the Fidelity FDIC Insured Deposit Sweep Program are swept into an FDIC-Insured interest-bearing account at one or more program banks. Deposits swept into the program bank(s) are eligible for FDIC Insurance, subject to FDIC insurance coverage limits. This works by sweeping your uninvested cash balance to a program bank where the deposit is eligible for FDIC insurance. If you have more than $245,000 in uninvested cash in your account, it will maximize your eligibility for FDIC insurance by allocating uninvested cash across multiple program banks. We currently have about 20 banks available for Fidelity Cash Management and IRA accounts (although new deposits at any point in time are subject to bank capacity limits). Assuming all the banks have available capacity, a customer could have up to $5 million of uninvested cash covered by FDIC insurance. 2 You can find details on how your core position is allocated within the “Positions” tab on Fidelity.com. In the event that you have more uninvested cash in your account than we can obtain FDIC insurance coverage for, we sweep that additional cash into a Money Market Mutual Fund as part of our Money Market Overflow feature. Fidelity also offers Brokered CDs, which are Certificates of Deposit issued by unaffiliated banks for customers of brokerage firms. Because the deposits are obligations of the issuing bank, and not the brokerage firm, FDIC insurance applies.

SIPC What is SIPC insurance? The Securities Investor Protection Corporation (SIPC) is a nonprofit organization that protects stocks, bonds, and other securities in case a brokerage firm goes bankrupt and assets are missing. SIPC is not a governmental agency and does not cover investment losses due to market fluctuation. The SIPC will cover up to $500,000 in securities, including a $250,000 limit for cash held in a brokerage account (this includes money markets). What Fidelity accounts are covered? All Fidelity brokerage accounts are covered by SIPC. This includes money market funds held in a brokerage account since they are considered securities, for example SPAXX which is the default option for uninvested cash in a retail brokerage or retirement account. Learn more about SIPC coverage at www.sipc.org. What if my assets exceed what is covered? In addition to SIPC protection, Fidelity provides its brokerage customers with additional “excess of SIPC” coverage through Lloyd’s of London. The excess coverage would only be used when SIPC coverage is exhausted. SIPC coverage protects assets held in brokerage accounts, including stocks, bonds, mutual funds, and money market funds. Total aggregate excess of SIPC coverage available through Fidelity’s excess of SIPC policy is $1 billion. Within Fidelity’s excess of SIPC coverage, there is no per customer dollar limit on coverage of securities, but there is a per customer limit of $1.9 million on coverage of cash awaiting investment. This is the maximum excess of SIPC protection currently available in the brokerage industry. Like SIPC, excess protection does not cover investment losses in customer accounts, including losses, due to market fluctuation.

What about money market funds? Money market funds invest in debt securities characterized by their short maturities and minimal credit risk. Money market mutual funds are among the lowest-volatility types of investments. Our money market funds are managed to provide safety and liquidity to investors in all market environments, and we continue to invest in high-quality money market securities in service of our customers (as we always have). We are confident we will be able to continue to provide this safety, stability, and liquidity for the investors in our money market funds. As we have heard questions on common terminology, when a money market fund loses parity with the dollar it is known as “breaking the buck.” Fidelity money market funds have never broken the buck. Take a look at the resources below for more detailed information on the different types of money market funds and what to consider before investing. You can also refer to a money market’s prospectus to learn more about the fund and risks that may affect the performance of the fund. https://www.fidelity.com/learning-center/investment-products/mutual-funds/what-are-money-market-funds?ccmedia=reddit&ccchannel=social_organic&cccampaign=what_are_money_markets&ccdate=20230313&cccreative=whataremoneymarkets&ccformat=text What happens in the case of a broker dealer’s insolvency? In the unlikely event a brokerage firm becomes insolvent, it is likely their accounts would be transferred to another broker. It is also possible that the insolvent firm’s assets will be sold to meet their obligations to return each client’s net equity value. In either case, it is important that clients of the insolvent brokerage firm file a claim with SIPC, and any excess SIPC insurance or other policies, to ensure maximum protection under the available policies.

1. For more information related to the FDIC, including coverage limits and rules, please visit www.fdic.gov 2. Under the Fidelity FDIC Insured Deposit Sweep Program, the uninvested cash balance is swept into an FDIC-Insured interest-bearing account at one or more program banks and, under certain circumstances, a Money Market mutual fund (the “Money Market Overflow”). The deposits swept into the program bank(s) are eligible for FDIC Insurance, subject to FDIC insurance coverage limits. Balances that are swept to the Money Market Overflow are not eligible for FDIC insurance but are eligible for SIPC coverage under SIPC rules. All assets of the account holder at the depository institution will generally be counted toward the aggregate limit. For more information on FDIC insurance coverage, please visit www.FDIC.gov. Customers are responsible for monitoring their total assets at each of the Program Banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits at Program Banks are not covered by SIPC. For more information regarding the FDIC Insured Deposit Sweep program please see the following disclosures: For Fidelity Cash Management Accounts visit: Fidelity®️ Cash Management Account FDIC-Insured Deposit Sweep Program Disclosure https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/PDF_Fidelity_Cash_Management_Account_FDIC_Disclosure_document_(PDF).pdf For the Retirement Account or Fidelity Health Savings Account, please go to: FDIC-Insured Deposit Sweep Program Disclosure https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fdic.pdf

Clients could lose money by investing in a money market fund. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before investing, clients should always read a money market fund’s prospectus for policies specific to that fund.