The nonprofit corporation that Robinhood Markets Inc. claims is backing its new checking and savings account says it cannot protect cash deposited for anything other than purchasing securities.

In 2019, Robinhood — a pioneer in the free-trading movement sweeping across Wall Street — plans to launch a nonbank "checking and savings" account that will provide customers with 3% interest on their deposits. The company has advertised the account as a way for retail investors to circumvent banks' "unfair and hidden fees" while achieving a higher interest rate. On its website, Robinhood says the accounts will be insured by the Securities Investor Protection Corp., or SIPC, which Robinhood says covers "your checking, savings and investments."

But the head of SIPC said the organization does not insure cash deposited for checking and savings accounts "since the money has not been deposited for a protected purpose." The comments cast a shadow of doubt over Robinhood's latest venture in the financial ecosystem, as the company reportedly weighs an initial public offering in the new year.

"SIPC protects cash that is deposited with a brokerage firm for one limited purpose," which is the purchase of securities, SIPC President and CEO Stephen Harbeck said in a statement. "Cash deposited for other reasons would not be protected."

The SIPC insures money held by member broker/dealers, including Robinhood, in case those companies fail. Its members typically offer brokerage accounts where customer money is stored as cash when not being invested.

Robinhood has said that SIPC will cover cash and securities up to a total of $500,000, half of which can be in cash. A spokesperson for Robinhood did not respond to a request for comment on Harbeck's statement.

The company operates a free-trading platform that has upended how some retail brokerages charge clients commission rates for trading. In an interview with Bloomberg, Harbeck reportedly said he has "serious concerns about this," referring to Robinhood's checking and savings account, and that he first heard about Robinhood's product the same day it was announced, Dec. 13. Harbeck has contacted the SEC about the matter, according to the report.

A spokesperson for the Financial Industry Regulatory Authority, which helps regulate Robinhood, declined to comment. A spokesperson for the SEC declined to comment on the disparity between Robinhood's and SIPC's statements.