This document (the “Disclosure”) provides you with important information about Cash Reserve (“Cash Reserve” or the “Program”), an investment option offered by Betterment LLC (“Betterment”) that will be held through your brokerage account held by MTG LLC d/b/a Betterment Securities (“Betterment Securities”). Cash Reserve is for cash you intend to purchase securities with and should not be viewed as a long term investment option. Please read these Disclosures carefully.
The Program is available only to clients who have instructed Betterment that they wish to participate in the Program in accordance with terms and conditions established by Betterment as set forth in the Betterment Advisory Agreement.
At any time, you may direct Betterment to deposit funds into interest-bearing deposit accounts (“Deposit Accounts”) at one or more banks participating in the Program (each a “Deposit Bank”). The Deposit Banks are set out on a list of Deposit Banks into which your funds may be deposited (the “Deposit Bank List”), as explained in Section 3 (“Deposit Bank List”).
When you elect to invest funds into the Deposit Accounts through Cash Reserve, you must direct Betterment as to the amount of your investment. At your direction, Betterment will instruct Betterment Securities to deposit funds from your brokerage account into the Deposit Accounts at the Deposit Banks. Betterment Securities will deposit your funds into the Deposit Banks from one of the following two sources:
- You may transfer the funds you wish to be deposited through the Program from an account that you hold at a third-party financial institution to your brokerage account; or
- If you do not transfer funds from an account at a third-party financial institution, Betterment, as your investment adviser, will direct Betterment Securities to sell securities you hold in your brokerage account in accordance with the investment discretion you have granted to Betterment in the Betterment Advisory Agreement.
Cash Reserve is not an automatic investment; you must direct Betterment to deposit funds into the Program. If you participate in the Program and direct Betterment to deposit funds into the Program, you authorize Betterment, on a discretionary basis, to direct Betterment Securities as to the allocation of your funds among Deposit Accounts at one or more Deposit Banks.
The Deposit Accounts (including principal and accrued interest) are insured by the FDIC, an independent agency of the U.S. Government, up to $250,000 for all deposits held in the same insurable capacity (e.g., individual, joint, IRA, etc.). In the event a Deposit Bank fails, the Deposit Accounts are insured up to $250,000, for principal and interest accrued to the date the Deposit Bank is closed.
All deposits that you hold at a Deposit Bank – including deposits arising in connection with programs offered by Betterment (such as the Transfer Sweep Program), as well as savings and checking accounts, money market deposit accounts, and certificates of deposit maintained directly by you by the Deposit Bank – will be aggregated for the purpose of determining available FDIC insurance. If your total funds on deposit at a Deposit Bank exceed the applicable FDIC insurance limit, the FDIC will not insure your funds in excess of the limit.
Deposit Accounts are not protected by the Securities Investor Protection Corporation (“SIPC”). See our FDIC disclosures for more information on FDIC deposit insurance and SIPC insurance.
In aggregate, your funds deposited into Cash Reserve are eligible for at least $2,000,000 of FDIC insurance (or $4,000,000 for joint accounts) at up to eight Program Banks.
Although certain types of accounts, such as trust accounts, may be eligible for additional FDIC insurance based on the number of beneficiaries, Betterment will allocate no more than $250,000 ($500,000 for joint accounts) at each Deposit Bank irrespective of any additional FDIC insurance for which you may be eligible. In its discretion, Betterment may allocate funds in excess of $2,000,000 ($4,000,000 for joint accounts) (such funds, “Excess Funds”) at (i) a Deposit Bank in which you already have deposits in an amount over the FDIC insurance limit or (ii) additional Deposit Banks in an amount under or over the FDIC insurance limit. Excess Funds deposited in an amount over the FDIC insurance limit will not be insured by the FDIC.
You may exclude any Deposit Bank from holding your Program funds by following the instructions in Section 3 below. If you elect to exclude one or more Deposit Banks from receiving your funds , the amount of FDIC insurance for which you are eligible through the Program will be reduced.
You will not have a direct account relationship with a Deposit Bank, and you will not be able to deposit funds into or withdraw funds directly from the Deposit Account. All questions regarding the Deposit Accounts and any complaints regarding Cash Reserve, should be directed to Betterment (by emailing email@example.com) and not to the Deposit Banks.
Each Deposit Account constitutes a direct obligation of the Deposit Bank and is not directly or indirectly an obligation of Betterment or Betterment Securities. You can obtain publicly available financial information concerning each Deposit Bank at fdic.gov or by contacting the FDIC Public Information Center by mail at L. William Seidman Center, Virginia Square, 3501 North Fairfax Drive, Arlington, VA 22226, or by phone at 703-562-2200. Betterment and Betterment Securities are not responsible for the financial condition of the Deposit Banks, and do not guarantee in any way the financial condition of the Deposit Banks or the accuracy of any publicly available financial information concerning Deposit Banks.
2. Relationship to Transfer Sweep Program
Cash Reserve is not an alternative to the Transfer Sweep Program described in the Betterment Securities Brokerage Agreement. Cash Reserve is available for you to select through your brokerage account by indicating your election to Betterment, while Betterment Securities utilizes the Transfer Sweep Program to automatically deposit, or “sweep,” your funds into deposit accounts pending the investment of those funds into securities or other investments.
One or more Deposit Banks receiving your funds through Cash Reserve may also hold your funds through the Transfer Sweep Program If a bank holds your funds through both Cash Reserve and the Transfer Sweep Program, all your deposits in that Deposit Bank, including deposits made through Cash Reserve and the Transfer Sweep Program, will be aggregated for the purpose of determining available FDIC insurance, as described in Section 7 below. Although you cannot exclude banks from the Transfer Sweep Program, you may exclude any Deposit Bank from holding your Cash Reserve funds by following the instructions in Section 3.
You are responsible for monitoring the total deposits you hold at any Deposit Bank (including amounts in other accounts at the bank held in the same right and legal capacity) in order to determine the extent of deposit insurance coverage available on those deposits. Neither Betterment nor Betterment Securities will monitor the total deposits you hold at any bank through either Cash Reserve or the Transfer Sweep Program. If your total funds on deposit at a Deposit Bank or TSP Bank exceed the applicable FDIC insurance limit, the FDIC will not insure your funds in excess of the limit.
3. Deposit Bank List
If you participate in Cash Reserve, you authorize Betterment, on a discretionary basis, to direct Betterment Securities as to the allocation of your funds among Deposit Accounts at one or more Deposit Banks. The Deposit Bank List is available at www.betterment.com/cash-portfolio. You should review the list carefully to determine which Deposit Banks are participating in the Program at any point in time. The Deposit Bank List is subject to change, and changes will be reflected on Betterment’s website. Typically, you will be provided advance notice of any changes to the Deposit Bank List in accordance with the terms governing the provision of notice in the Betterment Client Agreements. However, you acknowledge and agree that under certain limited circumstances, prior notification may not be possible.
You may exclude any Deposit Bank from the Program by making a request in writing to Betterment at firstname.lastname@example.org, subject to any conditions set by Betterment on your ability to exclude Deposit Banks. Any request to exclude a Deposit Bank will result in Betterment instructing Betterment Securities to withdraw your deposit balances at that Deposit Bank, if deposits were already placed at such Deposit Bank, and result in Betterment instructing Betterment Securities to not place any future deposits at such Deposit Bank. You acknowledge and agree that there may be a delay of up to five (5) business days between when your request is received and when a particular Deposit Bank is excluded. Your decision to exclude a Deposit Bank can be revoked at any time by contacting Betterment, provided that the Deposit Bank is still participating in the Program.
Deposit Banks may be added or removed from the Program based on various factors, including a determination by the Deposit Banks to leave the Program or a decision by Betterment to add or remove Deposit Banks to or from the Program. If a Deposit Bank is removed from the Program, Betterment will instruct Betterment Securities to transfer your deposits from that Deposit Bank into one or more Deposit Bank(s)
4. Establishment of the Deposit Accounts
Upon Betterment’s instruction, Betterment Securities, acting as your agent, will open one or more Demand Deposit Accounts (“DDAs”) at Deposit Banks. Betterment Securities, as your agent, may also open one or more linked money market deposit accounts (“MMDAs”) at the Deposit Banks as indicated on the Deposit Bank List. Deposit Accounts are non-transferable.
All withdrawals will be made from your DDA as instructed by Betterment. If funds in the DDA at a Deposit Bank from which Betterment has instructed funds to be withdrawn are insufficient to satisfy the debit, funds in the linked MMDA at that Deposit Bank will be transferred to the DDA to satisfy the debit, plus funds to maintain any DDA “threshold” amount that Betterment may, in its discretion, determine to be maintained in your DDA.
Pursuant to federal banking regulations, the Deposit Banks must reserve the right to require seven days’ prior written notice before you withdraw funds from an MMDA. DDAs are not subject to this restriction. The Deposit Banks have informed us that they do not currently intend to exercise this right against MMDAs.
5. Your Relationship with Deposit Banks
Deposit Account ownership will be evidenced by a book entry on the account records of each Deposit Bank and by records maintained by Betterment Securities as your custodian. No evidence of ownership, such as a passbook or certificate, will be issued to you. Your Betterment Securities account statements will reflect the balances in your Deposit Accounts at the Deposit Banks. You should retain the Betterment Securities account statements for your records. You may, at any time, obtain information about your Deposit Accounts by contacting Betterment Securities.
If Betterment terminates your use of the Deposit Accounts as an investment option, you may establish a direct depository relationship with each Deposit Bank, subject to its rules with respect to maintaining deposit accounts.
Similarly, if you decide to terminate your participation in the Program, you may establish a direct relationship with each Deposit Bank by requesting to have your Deposit Accounts established in your name at each Deposit Bank, subject to each Deposit Bank’s rules with respect to establishing and maintaining deposits accounts.
6. Deposit and Withdrawal Procedures
Betterment will instruct Betterment Securities with respect to deposits to and withdrawals from the Deposit Accounts at the Deposit Banks.
If an instruction from Betterment to Betterment Securities is received prior to 10:00 pm Eastern time, funds typically will be received by a Deposit Bank the next business day. Transfers from Betterment investing goals to Deposit Accounts typically will be received by a Deposit Bank two business days after the transfer is initiated. Withdrawal requests from Deposit Accounts completed in Betterment’s interface prior to 1:00 pm Eastern time typically will result in an ACH transfer to your linked checking account the next business day. Transfers of funds from Deposit Accounts to a Betterment investing goal typically will result in the placement of trades for investments the same business day as the transfer is initiated.
The foregoing times are not guaranteed and are subject to change without prior notice. Betterment Securities may impose a longer waiting period on certain deposits or withdrawals in accordance with its risk management procedures.
There is no minimum deposit amount, although individual Deposit Banks may establish minimum amounts for deposits. There are no limits to the number of deposits or withdrawals you can make under the Program, but the maximum aggregate daily deposit limit for ACH transactions is $300,000. There is no maximum withdrawal amount.
You acknowledge and agree that, although your funds will be eligible for FDIC insurance when they are held at Program Banks, FDIC insurance will not be continuously available while funds are in transit to or from Program Banks, whether in connection with deposits, withdrawals, or reallocations.
7. FDIC Insurance
The Deposit Accounts (including principal and accrued interest) are insured by the FDIC, an independent agency of the U.S. Government, up to $250,000 for all deposits held in the same insurable capacity (e.g., individual, joint, IRA, etc.). In the event a Deposit Bank fails, the Deposit Accounts are insured up to $250,000, for principal and interest accrued to the date the Bank is closed. For more information regarding FDIC deposit insurance, please see our FDIC disclosures for more information on FDIC deposit insurance.
You should also review carefully the information available on the FDIC's web site at https://www.fdic.gov/deposit/index.html. You may also call the FDIC at 877-275-3342 or write to the following address: Deposit Insurance Outreach, Division of Depositor and Consumer Protection, 550 17th Street NW, Washington, DC 20429.
In the event of a bank failure, and FDIC deposit insurance payments become necessary, there is no specific time period during which the FDIC must make insurance payments available, and you may not earn interest on your deposits from the time a Deposit Bank is closed. You understand and acknowledge that you may be required to provide certain documentation to the FDIC before insurance payments are made.
8. SIPC Coverage
Deposit Accounts are not protected by SIPC. Please see your Betterment Client Agreements for additional information about SIPC coverage and how it applies to your Betterment Securities brokerage account.
The interest rate at each Deposit Bank will be determined by the amount each Deposit Bank has agreed to pay with respect to the Deposit Accounts. Fees paid to Betterment, Betterment Securities, and other parties will affect the interest rate available to you. The interest rate available from each Deposit Bank will typically differ.
Interest rates paid on the Deposit Accounts may change daily.
Interest will accrue daily and be credited on the first business day of each month. Credited interest may be rounded to the nearest cent. Interest will accrue on Deposit Account balances from the day funds are received and accepted by the Deposit Bank through the business day preceding the date of withdrawal from the Deposit Bank.
Betterment Securities does not currently expect to realize any annualized net revenue in connection with Cash Reserve, but Betterment receives fees from Program Banks, and other service providers, including Betterment Securities, receive fees from Betterment for providing operational and administrative services.
11. Information and Statements
All transactions in your Deposit Accounts will be confirmed on your periodic Betterment Securities brokerage account statement. You will not receive trade confirmations. For each statement period, your statement will contain:
- All deposits to and withdrawals from your Betterment Securities brokerage account to/from Deposit Banks;
- The opening and closing balances of the Deposit Accounts at each Program Bank;
- The interest earned on your funds in Deposit Accounts; and
- The interest rate applicable to your Deposit Accounts at each Deposit Bank at the end of the statement period.
You understand and agree that you will not receive a separate statement from the Deposit Bank(s). Your Betterment Client Agreements set forth additional information and terms regarding your receipt of periodic statements, including your obligation to notify Betterment Securities of any errors contained in your periodic statements.
12. Tax Information
For most clients, interest earned on Deposit Account balances will be taxed as ordinary income in the year it is received. Betterment Securities will issue you a Form 1099-INT. Betterment Securities is not a tax advisor, and you should consult with a tax advisor to determine the tax consequences of earning interest through the Program.
Betterment Securities may modify this Disclosure at any time upon notice to you, which may be electronic, by means of a letter, an entry on your Betterment Securities brokerage account statement, an insert to your Betterment Securities brokerage account statement, or by other means. The current Disclosures will be available on the website, at http://www.betterment.com/legal/cash-reserve.