What If Webull Goes Out Of Business?
If you are using a free investing app like Webull, it is natural to wonder what will happen to your accounts if the service were to go out of business.
You can worry less with the knowledge that this is a very common concern. This is a question that people always ask when someone enters the world of investing through one of these brokers. We constantly get questions like "Is Webull Safe" or "Is Webull Legit."
It can be a question specifically of interest to Webull as they are a service that does not charge a commission for trades. This can lead people to ponder over how sustainable the platform is and how they make money at all.
Here's our article on how Webull makes money.
As you read further, we will do our best to make it clear exactly what can happen if the Webull platform goes under in the future.
For more information, check out our full review of Webull!
One of the best parts about Webull is new users get a free stock just for signing up and funding your account with any amount!
What Is A Broker Dealer?
First of all, let's identify what Webull is.
They are a broker dealer, which is a common term that people who are familiar with investing have likely heard before.
If you are new, what it means to be a broker dealer is basically what the name implies. It is their job to broker a transaction between the buyer and seller of their tradable financial assets.
When a broker dealer like Webull brokers a transaction, it is common for them to use a clearing house to complete the transaction.
The role of the clearing house is to act as a facilitator of the actual transaction between the buyer and seller of a financial asset.
What Clearing House Do They Use?
Webull works with Apex Clearing Corporation which both acts as their clearing house and holds custody of all assets that are in Webull accounts.
This is the same clearing house that many of the free investing apps rely on.
A custodian holds their client’s assets in a separate account. This does not mean that you transfer ownership to the custodian. Whether it is a broker dealer or a custodian, you never transfer ownership.
In a nutshell, Webull does not mix their assets with yours or other customer assets.
Furthermore, if there is a case of insolvency, the custodial assets that are held are in no way accessible to the creditor.
The law and the SEC dictate that the separation of these assets require annual reporting and strict compliance with this guidelines.
Does Webull offer FDIC insurance?
Short answer, no.
FDIC insurance is probably something you are at least a little familiar with if you have a personal bank account.
FDIC stands for Federal Depository Insurance Corporation and is responsible for protecting any deposits that are with a federally registered bank.
This means that each individual depositor has insurance for up to $250,000. This only applies to each depositor and not every individual account.
However, Webull is not a federally registered bank. They are a broker dealer, meaning they are covered under a different type of insurance called SIPC.
Does Webull offer SIPC insurance?
SIPC is the Securities Investor Protection Corporation.
It was founded to protect investors in the event of a brokerage breaking the law, whether that means unauthorized trading or theft of your personal financial assets.
This means that if a broker is insolvent, cannot return assets to their clients, or the client’s assets are missing, the SIPC will ensure that there are protections for the client during the liquidation process.
In addition to protecting assets, if there is a theft the SIPC will reimburse that theft up to $500,000 per individual client.
This includes up to $250,000 for cash held within a brokerage for the purpose of investing.
FINRA & SEC Regulation
The Financial Industry Regulatory Authority is a non-profit organization that aims to ensure investor protection and the integrity of the financial market.
FINRA works under the supervision of the SEC to write and enforce rules, examine firms for compliance, foster market transparency and educate investors.
Both Apex Clearing and Webull register with FINRA and the SEC.
Additional Safety Through Apex Clearing
In addition to the governing bodies and insurances listed above, Apex Clearing has taken an extra step to ensure their clients’ financial securities.
Per the Webull website, it is states that Apex Clearing has an additional insurance policy in place.
This policy provides “protection for securities and cash up to an aggregate of $150 million, subject to maximum limits of $37.5 million for any one customer’s securities and $900,000 for any one customer’s cash. Similar to SIPC protection, this additional insurance does not protect against a loss in the market value of securities.”
What this means is that in addition to the protection provided by SIPC and the FDIC, your assets will have another layer of protection through Apex Clearing.
So... Is Webull Safe?
Short answer, yes!
Webull has the same SIPC insurance as any other brokerage out there. In addition, they also have additional insurance through Apex Clearing.
They also store all data securely and encrypt it. They do not sell your information to third parties either.
There is no real risk to Webull other than losses that may incur through your investing. You can rest easy knowing that Webull is a platform millions of people trust.
In a nutshell, if Webull went out of business you have protection because...
- You maintain ownership of your assets as Webull acts as the broker dealer.
- The cash you have in a brokerage account for the purpose of investing is covered under SIPC up to $250,000.
- Your investments are also covered under SIPC for up to $500,000.
- Both Webull and Apex Clearing are under the supervision of the SEC and FINRA to ensure your safety as an investor.
- SIPC is there if there is a case of theft or unauthorized trading of your securities.
- Apex Clearing has taken the additional step to ensure client safety with the purchase of an insurance plan with more coverage than what SIPC provides on its own.
One of the best parts about Webull is new users get a free stock just for signing up and funding your account!