#SWEEP ACCOUNT FULL#

Most of the extra cash above the average balance will be invested into a money market, CD, or some other form of investment that can be easily liquidated.Depending on the institution's service, this amount may be pre-determined. A financial advisor and the client will discuss and determine an average balance that should be kept in this account.A cash account is set up first and a lump sum of money is deposited into that account.

Larger corporate bank accounts are charged numerous fees for each of the services the bank offers (such as a charge per every check deposited), however the bank rebates these fees based on the companies account balances in a process known as account analysis. If the bank were to fail, the depositor would just be given the bond holdings and then could sell the bonds to get their money back (unless something happens to the bond prices in the interim). In this arrangement, the swept funds on deposit with the bank are secured by some of the bond holdings of the bank. 'Repo sweeps' ('repo' meaning ' repurchase agreement') are for companies that are concerned about the safety of the bank. Essentially, the funds are just unsecured obligations of the bank, and therefore are paid the highest interest rate offered by the bank to overnight deposit borrowings.

#SWEEP ACCOUNT FULL#

The choices for sweep investments are often either money funds, 'eurodollar sweeps', or 'repo sweeps'.Įurodollar sweeps are legal transfers of funds to the bank's offshore entities, although essentially they are just an accounting technique to allow the banks to have full lending of the funds without the reserve requirements normally required and without having to pay for FDIC insurance (as the sweep is uninsured). In this system, the funds are described as being 'swept overnight' into an investment vehicle of some kind. In banking, sweep accounts are primarily used as a legal workaround to the prohibition on paying interest on business checking accounts.

It has also become part of the arsenal of services offered by credit card companies. Many banks and financial institutions offer a sweep account service for personal customers and small business owners. Sweep accounts are useful in managing a steady cash flow between a cash account used to make scheduled payments, and an investment account where the cash is able to accrue a higher return. With respect to 'sweep accounts', the Department stated in Opinion of General Counsel No.A sweep account combines two or more accounts at a bank or a financial institution, moving funds between them in a predetermined manner. The opinion addressed only whether 'sweep accounts' could be used by insurance producers and under what circumstances and did not alter the Departments position on the ownership of the interest earned on such accounts. The manner in which the inquirer's clients have interpreted Opinion of General Counsel No. 06-01-09 (January 6, 2006) indicates that insurance agents 'can earn interest on premium funds by utilizing a sweep account as long as the account is an FDIC insured money market account and not a mutual fund.' It is presumed that his clients believe that they have an ownership right to such interest for the reason that the funds have been deposited in a sweep account. He states that some of his clients believe that Opinion of General Counsel No. The inquirer represents several insurance agents in his area. 11, § 20.3(b)(4) (Regulation 29), interest generated on premiums collected or return premiums belongs to the insurer or insured, respectively, unless the insurance producer has an agreement with such insurer or insured for the insurance producer to retain the interest. If a licensed insurance producer maintains a 'sweep account' for premium funds, who is entitled to the interest that is earned on the deposits? Conclusion:

Re: Use of Sweep Account for Premium Funds Account Interest. The Office of General Counsel issued the following opinion on Aprepresenting the position of the New York State Insurance Department.