I was contemplating buying CVS Pharmacy stock using their Direct Investing/ Re-Investing Dividend plan by The Bank Of New York. But the first thing I read about it was the following statement: "Shares are not protected under The Securities Investors Protection Act of 1970" Does this mean that they do not offer investors the same protection that a regular brokerage account does? The CVS.Com website under investor relations directs anyone interested in their direct purchase / dividend re-investment plan to The Bank of New York but I am hesitant now as due to that statement and what exactly does it mean? See here: http://stock.bankofny.com/buydirect/BDB4954.pdf
If you were buying enough shares for this to make a difference, why wouldn't you use a broker, pay the commish, and get a better entry price? Just curious...I do not trade or invest in equities... Michael B.
It is something I want to do like a trust for my grandson. The CVS plan is $100.00 for initial investment and then they give the option for $100.00 per month ACH every month from a checking account of mine....Something I want to do for him and just let them deduct it each and every month and then when he is 21 in 21 years it might be worth something...but if the stock in this plan is not protected like brokerage accounts are in case of failure then the hell with it...but I am very confused why they say the shares are not protected by the Securities Investors Protection Act of 1970... Why not?..I always thought shares in a brokerage account under The Securities Investors Protection Act of 1970 were protected up to something like $500k and up to $100k for Cash or something like that. So why shouldn't The Bank of New York who handles CVS's direct investment plan be any different?
Instead of participating in a monthly purchase plan, make an annual purchase in one of those share-builder plans. You can reduce the fees you pay and transactional paperwork. Better still, make a one-time $25,200 purchase of shares for him and let it ride until your grandson turns 21 years of age. $100 per month multiplied by 12 months per year multiplied by 21 years equals 25,200 dollars. Get it over with in one shot!