investingsimple logo
Written by Cari Scribner on October 22, 2020
FTC Disclosure

What Happens If Robinhood Goes Out Of Business?

Robinhood is a leading commission-free trading platform that’s known as a pioneer in the field. It has seen massive growth and adoption since it was launched in 2013. As of now, they have amassed more than 10 million accounts!

But still, all of us tend to have nagging, middle-of-the-night worries about our money. This includes our online brokers. Electronic platforms can seem risky because there’s no actual banking branch where we can walk in and withdraw our investments in cash!

So we are asking the question today, what happens if Robinhood goes out of business?

It’s not like they have actual doors to close, but what if we hear in the news they’ve shut down and somehow disappeared?

The short answer is that you can set aside your fears. Your investments with Robinhood are safe.

Now, let’s look at this in more detail.

But before we jump in – there’s a very important caveat here that you need to know about protecting your investments. There is no insurance against any losses you end up with in your portfolio. When you make a quick decision based more on impulse than information, you may see a loss. That loss is non-refundable.

However, if something goes haywire at Robinhood and everyone’s money is lost, you will be covered.

Best Free Stock Promotions

Robinhood Logo1 Free Stock (Up To $200)Download
Webull Logo4 Free Stocks (Up To $3,700)Download
Firstrade trading platform3 Free Stocks (Up To $600)Download
Public LogoFree $10 Stock SliceDownload
M1 Finance Robo AdvisorGet $30 When You Deposit $1,000Download

If Assets Go Missing

Robinhood is a member of the Security Investment Protection Corp (SIPC), that is an umbrella of coverage if companies fall into financial trouble or even bankruptcy.

SIPC's was put in place to restore customer cash and securities. The SIPC insures the value of your investment portfolio, as well as any cash you have in reserve. This insurance covers up to $500,000 in your portfolio. It also insures $250,000 of cash for the purpose of investing.

Always remember that you are responsible for monitoring your total to be certain you do not exceed SIPC insurance limits. This could mean some of your funds are uninsured.

The SIPC is a not-for-profit corporation chartered to protect the clients of brokerage firms that are forced into bankruptcy. Members of the SIPC include all brokers and dealers registered under the Securities Exchange Act. Robinhood is a registered member.

Other Layers Of Protection

The SIPC keeps your securities and cash safe in other ways as well.

They require brokers to:

  • Keep customer assets in separate accounts from Robinhood’s own money
  • Have a minimum amount of liquid assets readily available as an emergency fund for the platform

Getting Your Money Back Fast

Federal laws require the SIPC to refund your money and securities in a short timetable.

SIPC and the court-appointed Trustee will work to return your securities and cash as quickly as possible. This means you can rest assured, your losses won’t be tied up in court for years.

Your shares will be worth the price on the close of the business day on the date the petition is filed with the SIPC.

Additional Protection

The Financial Industry Regulatory Authority (FINRA) is also in place to protect your money and investments in Robinhood.

They have several missions to help investors, including:

  • Write and enforce rules supervising the ethical activities of all registered broker-dealer firms and registered brokers in the U.S.
  • Examine firms for compliance with those rules
  • Foster market transparency
  • Provide education for investors

In 2019, FINRA:

  • Brought 854 disciplinary actions against registered brokers and firms for unethical behavior
  • Levied $39.5 million in fines
  • Ordered $27.9 million in restitution to harmed investors
  • Referred more than 800 fraud and insider trading cases to the SEC and other agencies for litigation and/or prosecution

FDIC Insurance

The Federal Deposit Insurance Corporation (FDIC) also insures your money that you deposit into Robinhood cash management products.

To be clear, all investments are covered under SIPC insurance which we discussed above. One caveat here is crypto purchased on Robinhood, which has no federal insurance against losses.


  • Insures deposits
  • Examines and supervises financial institutions for safety, financial stability, and consumer protection
  • Works to resolve large and complex financial issues
  • Manages receiverships

The FDIC covers accounts up to $250,000. Robinhood offers up to $1,000,000 in FDIC insurance by spreading your money across multiple custodial accounts.

robinhood interface

About Robinhood

Robinhood is one of the simplest trading platform out there in what is becoming a very crowded field. As a result, intermediate to advanced traders often find this platform to be lacking when it comes to research tools, order types and technical indicators. Still, if you are looking for a simple platform to trade commission free, it is an excellent option.

Robinhood is a 100 percent free trading platform. Robinhood does not charge any hidden fees or attach any strings! Don’t have the cash to open a sizable account? No worries. Robinhood doesn’t have a purchase minimum, which means you will be able to start investing right away.


You can rest easy that your cash and securities will not disappear in the very unlikely event that Robinhood crashes financially or goes bankrupt.

Your investments are protected under SIPC insurance, with the exception being cryptocurrency.

Cash within the savings account is protected under FDIC. Lastly, cash held within your brokerage account for the purpose of investing is protected as part of SIPC.

One final reminder, no one is insuring you against losses experienced from investing!

what happens if robinhood goes out of business
Article written by Cari Scribner
Cari Scribner is a career journalist with 20 year’s experience writing for newspapers and magazines. Now a freelance writer, she is also a published fiction writer with more than 15 short stories in literary mags. She recently completed a novel that is on the desk for consideration at two publishing houses. She lives with her two small dogs, Miloh and Lucy, in Upstate NY.

Latest Posts

Power Your Investing

Choosing the right product and service is essential for your investing. Here are some of the tools and services to help your portfolio grow.
Stock Rover
From stock screening and charting, to investment research and portfolio construction, Stock Rover provides a robust all-in-one platform for the do it yourself investor.
Try Stock Rover
The smart money manager.
Betterment provides investment management and access to financial planners. Basic plans start at a 0.25% annual fee.
Try Betterment
Passively invest in private real estate deals with as little as $500. Fundrise allows you to own residential and commercial real estate across the U.S. starting at a 1% annual fee.
Try Fundrise
© Copyright 2018 - 2020 Investing Simple LLC. All Rights Reserved. Investing Simple is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that investment markets have inherent risks, and past performance does not assure future results. Investing Simple has advertising relationships with some of the offers listed on this website. The information on Investing Simple could be different from what you find when visiting a third-party website. All products are presented without warranty. For more information, please read our full disclaimer.
Developed by Stallion Cognitive
Copy link
Powered by Social Snap