Jung & Associates, P.C.

            In this day of uncertain financial times, it may be appropriate to consider whether your financial investments are secure.  For example, the Reserve Management Company, a pioneer in money-market mutual funds, became the first money-market fund to expose its investors to losses by "breaking the buck."[1]  In this instance, the money-market fund, which is expected to maintain the value of one dollar for each dollar invested, fell below that value.  Such funds are normally a safe haven and hold approximately three trillion dollars in assets.  Although lawsuits have been filed over the management of the money-market funds, without a showing of fraud, it is doubtful, according to some, that investors will be able to recover their losses.  Therefore, it is a good idea to evaluate the nature of your investments in order to determine whether they are federally insured should an institution holding your investments fail. 

            Investment banks, such as Lehman Brothers Holdings, Inc., and other investment brokerages, such as TD Ameritrade, E-Trade, or other on-line trading companies, are not federally insured.  Therefore, unless the specific fund is backed by the United States Government, such as a U.S. Treasury Fund, these investments are uninsured. 

                The Federal Deposit Insurance Corporation ("FDIC") is required to provide insurance for "depository institutions."[2] A depository institution means any bank or savings association as defined in 12 U.S.C. § 1813(c).  What is insured is a deposit, as that term is defined by 12 U.S.C. § 1813(l).  FDIC insurance applies only to deposits, not investments.  The FDIC protects checking accounts, savings accounts, CDs and other types of deposits.  This insurance protects depositors from loss due to the institutions insolvency, not loss from the bank's pre-insolvency mistakes. The FDIC does not insure money invested in products, such as mutual funds, stocks, bonds, life insurance policies or annuities even if purchased from a FDIC insured institution.  Under "Consumer Resources" at the FDIC Website[3] there are numerous resources to assist in evaluating whether your investment is insured.  One such guide entitled "Your Insured Deposits" is linked to Page 4 of 5 under Consumer Reports on the Website.  

            Secondly, you should ensure that your investments fall within the insurance limits of $100,000 per depositor or $250,000 for certain retirement accounts.  With certain exceptions, a depositor's accounts are insured up to $100,000 in the aggregate per depository institution.[4]  This includes all accounts held in one person's name at a depository institution, all accounts held in the name of a business and are a sole proprietorship, and accounts that fail to qualify for coverage under another ownership category.  Deposits maintained in different categories of legal ownership at the same bank can be separately insured.

            In order to determine whether your investment qualifies for a deposit to be insured by the FDIC, it is imperative that you ask questions of the institution prior to making the deposit.  You may verify this information with the FDIC by calling toll free at 1-877-275-3342 or under Bank Find at http://www2.fdic.gov/idasp/main_bankfind.asp.  If you have further questions or need clarification, it is strongly advised to visit the FDIC Website identified above.  I hope that this information has been helpful.

Sincerely,

Ronald D. Jung

DISCLAIMER. This letter and any information contained herein are intended for informational purposes only, and should not be construed as legal advice.  Seek competent legal counsel for advice on any legal matter.