Robinhood claim misses mark

Yes — a checking account that gives you 3 percent interest is probably too good to be true.

Robinhood — a popular investing app backed by some of Silicon Valley’s most prestigious investors — announced Thursday it would hold consumers’ cash in insured checking and savings accounts that yielded a 3 percent interest rate — much higher than banks like Chase, which pays about 0.01 percent for checking.

The digital investing platform, which isn’t a bank, was planning on using a loophole to make special brokerage accounts that would hold cash, and would be insured by the Securities Investor Protection Corp., a nonprofit that would pay back investors some losses if Robinhood went belly-up.

But Robinhood, which is backed by venture capital giants Sequoia and Kleiner Perkins, ran into a problem: SIPC said it had never heard of the plan, and that it couldn’t legally insure the accounts anyway.

“SIPC does not protect checking and savings accounts since the money has not been deposited for a protected purpose,” SIPC CEO Stephen Harbeck told MarketWatch.

In short, if the money isn’t being used for buying and selling stocks or bonds, it can’t be insured.

While Robinhood continues to offer the accounts on its Web site, its unclear if the products will be allowed to go through. Harbeck told MarketWatch he asked the Securities and Exchange Commission to look into the broker.

Robinhood didn’t respond to a request for comment.