Sweep Deposit Fund Management

Questions and Answers

What action does VBS take if there are insufficient funds in your deposit account?

VBS will withdraw funds from other available sources as described in your Brokerage Agreement.

How is the yield on your Sweep Deposits determined and maintained across different Program Banks?

The yield on Sweep Deposits is passed along at the same rate regardless of which Program Bank holds the assets.

What is the annual percentage yield (APY) and how is it communicated to account holders?

The APY earned on Sweep Deposits is stated on your VBS Account statement under Current APY Information.

What restriction is imposed on withdrawals or transfers from a NOW account or MMDA by the Program Banks?

Program Banks may require seven days’ prior written notice before such withdrawals or transfers. Signup and view all the answers

What happens to access of Sweep Deposits if a Program Bank fails?

Access to your Sweep Deposits at that Program Bank may be restricted. Signup and view all the answers

When does the yield begin to accrue on your Sweep Deposits?

Yield will begin to accrue on the day your Sweep Deposits are credited to the Program Bank. Signup and view all the answers

What is indicated on your Account statement regarding Sweep Deposits and their yield?

The amount of the APY earned on your Sweep Deposits is stated on your VBS Account statement. Signup and view all the answers

How does VBS manage the transfer of Eligible Balances and withdrawals from your MMDA?

VBS will transfer funds from your MMDA to the related TA as necessary to satisfy withdrawals. Signup and view all the answers

What is the current maximum deposit insurance amount (SMDIA) provided by the FDIC for each insurable category?

$250,000 Signup and view all the answers

How does VBS determine the eligibility of your Eligible Deposit Balances for FDIC insurance?

VBS aggregates and allocates Bank Sweep deposits for FDIC insurance at the account level, not the beneficiary level. Signup and view all the answers

What types of accounts have special FDIC insurance rules mentioned in the content?

Trust accounts and certain other FDIC qualifying accounts like certificates of deposit. Signup and view all the answers

What happens to eligible deposits once they are transferred to a Program Bank through the Bank Sweep product?

They become Sweep Deposits and are eligible for FDIC insurance. Signup and view all the answers

What factors determine the fee that VBS receives from Program Banks?

The fee is set by VBS, may vary from bank to bank, and can be changed at any time. Signup and view all the answers

What condition is placed on deposits made through the Bank Sweep regarding additional accounts held at the same bank?

Deposits in multiple accounts within the same insurable category will be aggregated to determine FDIC insurance coverage. Signup and view all the answers

How does the Bank Sweep program affect the yield clients receive on their deposits?

Clients typically receive a lower yield on deposits due to the fees retained by VBS. Signup and view all the answers

Do the FDIC coverage rules monitor or take responsibility for funds outside the Bank Sweep?

No, the FDIC does not monitor or take responsibility for those funds. Signup and view all the answers

In what instance could your Sweep Deposits be impacted by the existing deposits held at a Program Bank?

If the total deposits exceed $250,000, it could result in a loss of FDIC insurance coverage for the excess amount. Signup and view all the answers

What might prompt VBS to suspend participation in the Bank Sweep program?

VBS can determine it is necessary or advisable to suspend participation at its sole discretion. Signup and view all the answers

What is the effect of having multiple accounts with the same category of account ownership on FDIC insurance?

It could limit insurance coverage to the SMDIA if the total deposits exceed that limit. Signup and view all the answers

What happens to Eligible Balances during a suspension of the Bank Sweep?

Eligible Balances are swept into an alternative Sweep Program or maintained as a Free Credit Balance. Signup and view all the answers

Are balances held through an alternative Sweep Program FDIC-insured?

No, the Eligible Balances held through an alternative Sweep Program may not be FDIC-insured. Signup and view all the answers

How will clients be notified if their participation in the Bank Sweep is suspended?

VBS will notify clients in advance of any suspension, if practicable. Signup and view all the answers

What interest can clients expect to earn on balances during a suspension of the Bank Sweep?

Clients will earn interest on the alternative sweep vehicle selected by VBS during the suspension. Signup and view all the answers

How does the return on Eligible Balances under the Bank Sweep compare to the alternative Sweep Program offered by VBS?

The return can be either higher or lower than that offered under VBS’ alternative Sweep Program. Signup and view all the answers

What responsibility do you have regarding monitoring your FDIC insurance limits with multiple accounts?

You are solely responsible for monitoring the aggregate amount that you have on deposit with each Program Bank. Signup and view all the answers

What should you consider doing if you have other funds deposited at a Program Bank aside from your Bank Sweep?

You should consider designating that Program Bank as ineligible to receive your Eligible Balances. Signup and view all the answers

What is the primary function of the Vanguard Cash Plus Account?

The Cash Plus Account helps you manage your cash assets in conjunction with your Vanguard Brokerage Account. Signup and view all the answers

Which sweep option is available for the Cash Plus Account?

The only sweep option available is the Bank Sweep. Signup and view all the answers

What are you required to do in case you believe your consumer credentials have been compromised?

You must tell the institution at once if you believe your username and password are compromised. Signup and view all the answers

Are the disclosures regarding FDIC insurance comprehensive and complete?

No, the disclosures are summary only and do not state all requirements and conditions of FDIC insurance. Signup and view all the answers

What limitations exist in the Cash Plus Account compared to the Vanguard Brokerage Account?

Certain features of the Vanguard Brokerage Account are not available in the Cash Plus Account. Signup and view all the answers

What kind of account is the Vanguard Cash Plus Account considered?

It is considered a separate brokerage account. Signup and view all the answers

Under what circumstances might information about Your Cash Plus Account be disclosed to third parties?

Information might be disclosed for completing transactions, verifying account existence, complying with legal orders, or if written permission is given. Signup and view all the answers

What happens to fund balances subject to a seven-day hold regarding disclosure?

Fund balances subject to a seven-day hold cannot be disclosed or swept from the account. Signup and view all the answers

What should be done if an ACH transaction exceeds the maximum daily transaction amount?

If an ACH transaction exceeds the maximum daily amount, it will not be processed. Signup and view all the answers

What types of circumstances can prevent an ACH transaction from occurring despite precautions?

Circumstances like fire, inclement weather, floods, or other natural disasters can prevent an ACH transaction. Signup and view all the answers

What should a customer do if they wish to allow the disclosure of their account information?

The customer must provide written permission to allow the disclosure of their account information. Signup and view all the answers

Study Notes

Bank Sweep Program Overview

VBS withdraws funds from available sources if there are insufficient balances in your deposit account.
Eligible balances earn daily yield on Sweep Deposits at specified Program Banks.

Yield and APY Details

Yield paid on Sweep Deposits is consistent across different Program Banks, subject to future changes.
Annual Percentage Yield (APY) for Sweep Deposits is disclosed on your VBS account statement.
Yield accrual starts the day deposits are made and continues until withdrawn.

Withdrawals and Accessibility

Program Banks may require seven days' notice for withdrawals from certain account types, like NOW accounts or MMDAs.
DDA accounts are exempt from this restriction.
Access to Sweep Deposits may be limited if a Program Bank fails.

Maintenance of Eligible Balances

VBS automatically transfers funds to maintain eligible balances necessary for withdrawals.
Sweep accounts will accrue interest until the withdrawal day.

Conflicts of Interest

VBS receives fees from Program Banks for Sweep Deposits, influencing the yield offered to clients.
Clients typically receive a lower yield due to these fees, compared to clients depositing directly at Program Banks.
During program suspension, VBS may move balances to an alternate Sweep Program or maintain them as Free Credit Balances.

FDIC Insurance Coverage

FDIC insurance covers Sweep Deposits up to the standard maximum of $250,000 per insurable account category.
Aggregate deposits at a Program Bank impact FDIC insurance eligibility across all accounts with the same ownership type.
Special FDIC rules apply to trust accounts and certain account types.

Cash Plus Account Features

Vanguard Cash Plus Account is a separate brokerage account designed to manage cash assets.
It offers limited features compared to the primary Vanguard Brokerage Account.
The Bank Sweep is the only Sweep option available within the Cash Plus Account.

Error Resolution and Liability

Immediate reporting of unauthorized use of account credentials is crucial for liability reduction.
Information about the account or transactions can be disclosed for transaction completion or third-party verification.

Miscellaneous

ACH transactions may be limited by certain restrictions, including maximum daily amounts.
Documentation will outline preauthorized credits, debits, and error resolution notices.

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Description

This quiz covers the management of Sweep Deposits within your brokerage account, particularly focusing on how yields are earned and funds are withdrawn. Review the guidelines outlined in your Brokerage Agreement to better understand how these processes work.