Safety of Client Assets
At Robert W. Baird & Co. Incorporated (“Baird”), we believe our customers should have complete confidence in the safety of their assets held at our firm. Following is a brief description of our firm and a detailed description of the number of ways in which our customer’s assets are protected.
Introduction to Baird
Baird is a privately held and employee-owned broker-dealer and investment adviser established in 1919. We provide our clients with wealth management, investment banking, institutional research and trading, asset management and private equity services. Baird and its affiliates provide financial services to clients across the globe.
Baird Success and Creditworthiness
The first and foremost protection for our customers is the long-term success and creditworthiness of Baird. Baird has been financially sound for 100 years, and because we are privately held and employee-owned, we are able to keep our focus on the best long-term interests of our clients and the firm. Baird is highly capitalized with net capital well in excess of the regulatory requirement, and Baird has been consistently profitable, both in good and lean markets, allowing us to continue to invest in the capabilities we provide to you. We have used debt conservatively and have significant unused bank commitments. As of December 31, 2019, Baird had total capital – including shareholders’ equity and subordinated debt – in excess of $1.2 billion.
SEC-Registered, Member FINRA & SIPC
Baird is dually-registered with the Securities and Exchange Commission (SEC) as a broker-dealer and investment adviser. As a broker-dealer with custody of client assets, Baird is also a member of the Financial Industry Regulatory Authority (FINRA). As a result, Baird is regulated and regularly examined by the SEC and FINRA, both of which set and enforce various rules and regulations protecting investors and client assets. Compliance with various customer protection and custody rules as well as our own internal procedures is also subject to review by independent auditors. Baird’s procedures involve regular reconciliations of assets in client accounts. Please contact your Baird representative with any questions you may have about Baird’s internal procedures of compliance with applicable rules or regulations or, for more information about our primary regulators, their missions and focus on investor protections, please visit www.sec.gov or www.finra.org.
Securities Investor Protection Corporation (SIPC)
Baird is also a member of the Securities Investor Protection Corporation (SIPC). SIPC was created by Congress to protect customers of securities brokers and dealers and to promote public confidence in the U.S. securities markets. Customers of a SIPC-covered firm that fails financially are afforded special benefits under the Securities Investor Protection Act of 1970, as amended (SIPA).
Insolvency of a Broker-Dealer
In the event a firm becomes insolvent, SIPC may ask a federal court to appoint a trustee to liquidate the firm. It is important to note that, in such an event, customer assets are not part of the insolvent firm’s bankruptcy estate. Therefore, so long as customer assets can be located and are identifiable through the firm’s records as belonging to customers, such property will not be subject to the claims of creditors of the insolvent broker-dealer.
Some or all customer accounts of a failed firm may be transferred to another SIPC member firm. However, in some cases, the transfer of accounts will not be feasible. When customers’ claims are not fully satisfied in connection with a broker-dealer’s insolvency, subject to the dollar-amount limitations noted below as well as those limitations noted below in the section titled “Limitations on SIPC Coverage,” any remaining shortfall may be covered by a combination of SIPC protection and other protection that may have been obtained by the broker-dealer in question (see the section titled “Baird’s Insurance Policy in Excess of SIPC Limits” for a discussion of the additional protection Baird offers its clients). The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash, and protects against such a shortfall. Clients owning accounts at a failed institution in different capacities in addition to their individual capacity may be eligible for additional protection. For more information, visit www.SIPC.org.
Limitations on SIPC Coverage
SIPC covers most types of securities, such as stocks, bonds, mutual fund shares and variable annuities, but it does not cover commodities (including commodity futures contracts and options), fixed annuity contracts, currency or investment contracts (such as limited partnerships) that are not registered with the SEC under the Securities Act of 1933. SIPC and the excess SIPC policy do not protect against losses caused by a decline in the market value of a client’s securities.
Under SIPC rules, an individual’s interests in securities accounts maintained with a single brokerage firm are covered in the aggregate; that is, they would represent a single claim up to the maximums described above. Of course, a customer who holds several accounts in different legal capacities (for example, as trustee for several different trusts with different beneficiaries) may receive separate protection for each account.
Although created by Congress, SIPC is not a government agency. It is a non-profit membership corporation that receives its revenue from those brokers and dealers who are required by law to be SIPC members. SIPC also receives revenues from its investments. If the Fund proves insufficient to satisfy customers’ claims, SIPC can draw upon a $2.5 billion line of credit from the U.S. Treasury.
Baird’s Insurance Policy in Excess of SIPC Limits
For additional security, Baird offers coverage in excess of SIPC limits through an insurance policy purchased through Lloyd's of London. The Lloyd's policy has an aggregate coverage limit of $250 million for all claims of Baird customers eligible for distributions under SIPA. The policy has a sublimit of $1.9 million per customer for cash awaiting reinvestment.
Financial Institution Bond
As additional protection, Baird has a Financial Institution Bond totaling $60 million per occurrence and$120 million in the annual aggregate. This is provided under a comprehensive Stockbrokers’ Blanket Bond. The Blanket Bond affords coverage against loss of securities due to fraud (including employee fraud), theft, mysterious disappearance, damage, destruction and forgery or alteration.
Federal Deposit Insurance Corporation (FDIC)
Deposits at banks and CDs are generally insured by the FDIC on principal and accrued interest up to $250,000 per individual depositor for all deposits held in the same capacity at a bank. For joint accounts, the insurance limit is $250,000 for each owner of the account. Baird maintains a Cash Sweep Program with a number of FDIC-insured participant banks. By having a number of FDIC-insured banks participating, your cash balances can be spread among these banks, providing the potential for FDIC coverage greater than that which you would have if your cash deposits were held only in a single bank. This feature currently seeks to make available up to $1,250,000 for most account types (or $2,500,000 for joint accounts with two or more owners) of aggregate FDIC insurance protection for the cash balances of clients participating in the Cash Sweep Program. Please note the number of banks participating in the Cash Sweep Program may change from time to time.
FDIC coverage protects against the loss of deposits if an FDIC-insured bank fails. The FDIC regularly reviews the operations of the banks it covers to ensure they meet high standards of financial strength and stability. See www.FDIC.gov for more information.
In the unlikely event of a bank failure, Baird will submit proof of the deposit amount to the FDIC on behalf of each client owning deposits through Baird in the defaulted bank. The FDIC will then determine the amount of insurance reimbursement.
SIPC and Baird’s insurance policy in excess of SIPC limits do not provide protection for bank deposits in the event of a bank failure.
Controls and operating systems are continuously evaluated by management and by Baird’s Internal Audit Department, which is responsible for auditing and monitoring the activities of the firm and its subsidiaries on a regular basis to ensure that employee duties are properly segregated and that counter-control procedures are functioning properly. As a back-up to Baird’s Internal Audit Department reviews, the effectiveness of these systems is also reviewed by independent accountants.