Accounting for cash & Short-Term Investment
Abstract
Data processing for an improved securities brokerage-cash management system supervises,
implements and coordinates a margin securities brokerage account; participation in one or more
short term investments; and subscriber unilaterally initiated use of charge, debit or checking
instruments. Subscriber expenditures, effected as by charge card use, check and/or cash advance
are applied on a hierarchal basis, seriatim, against the subscriber's free credit balance, short term
investment and the lendable equity in his securities account. On a periodic basis, e.g., daily,
received card charges, check, securities and deposit transactions for the ensemble of account
participants are verified and employed to compute an updated credit limit for each subscriber.
In accordance with one aspect of the present invention, the short-term investments available to
subscribers include an ordered ensemble of insured savings accounts.
Introduction
This invention relates to financial business systems and, more specifically, to data processing
methodology and apparatus for effecting an improved securities brokerage and cash management
system.
It is an object of the present invention to provide an improved brokerage/cash management system.
More specifically, it is an object of the present invention to provide a data processing implementation for a
brokerage-cash management financial system which provides for automatic investment of free credit cash
balances in short term investments which include an insured savings account option; a full range of
security brokerage transaction functions; which permits consumer transaction ("charge") card and check
charges; and which includes safeguards against abuses, e.g., check kiting.
The above and other objects of the present invention are realized in specific illustrative improved
securities brokerage-cash management system for supervising, integrating and coordinating a margin
securities brokerage account; participation in one or more short term investments; and subscriber-initiated
use of a transaction charge card and/or checks. Subscriber expenditures as by charge card use, check,
and/or cash advance are applied on a hierarchal basis against the subscriber's free credit cash balance,
short term investment and, finally, his securities equity. On a periodic basis, e.g., daily, received card,
check, securities and deposit transactions for the ensemble of account participants are verified and
employed to compute an updated credit limit for each subscriber.
In accordance with one aspect of the present invention, the short term investments available to
subscribers include an ordered ensemble of insured savings accounts.
The foregoing and additional features and advantages of the instant invention will become more readily
apparent from the following detailed description of a specific illustrative embodiment thereof, presented
hereinbelow in conjunction with the accompanying drawing, in which:
FIGS. 1A and 1B are respectively the upper and lower portions of a schematic flow chart depicting the
data processing methodology and structure in accordance with the principles of the present invention for
an improved brokerage/cash management system of accounts;
FIG. 2 is a flow chart depicting data processing for the credit limit updating and overdraft functional blocks
26, 31 and 33 of the FIG. 1 overall data processing disclosure;
FIG. 3 is a flow chart illustrating updating a short term investment position functional block 45 of FIG. 1;
and
FIG. 4 is a flow chart depicting representative insured savings account processing 68 of FIG. 1.
Referring now to FIG. 1, there is shown in overall scope a data processing and system operational flow
chart for implementing an improved securities brokerage/cash management system incorporating the
principles of the present invention. As contemplated by the present invention, there are three fundamental
aspects of service offered to each of plural system subscriber. At the kernel of the overall system is a
margin brokerage account in which each customer may effect the usual diverse array of securities and
related transactions--e.g., those offered by a full service brokerage house. As a second facet, there is at
least one and in general a plurality of vehicles for short term investment of funds, e.g., pooled trusts and,
importantly for present purposes, insured savings accounts ("ISA"). These investment accounts and/or
trusts, managed by a bank, fiduciary or custodian with ancillary services possibly furnished by an
investment advisor or the like, provide each system subscriber with one or more ways of earning yield on
funds not then required for other purposes herein discussed. Such excess funds may be generated by
subscriber deposits; by dividends or interest paid on securities in the subscriber's brokerage account;
may represent proceeds of sale, securities redemption or like transactions in the brokerage account; or
the like. The third and final aspect of the instant system arrangement comprises a transaction ("charge")
card and a checking account. The transaction card is usable at the subscriber's sole discretion, under his
control, to charge goods and services offered by those accepting the charge card. The charge card may
be independent or may be affiliated with some charging system, e.g., the well known "VISA" charge
system. The bank checks require no explanation and are simply payment orders drawn against the bank.
The check amounts are satisfied from the subscriber's free credit balance, short term investment position
or his securities margin account in that order.
By way of brief overall philosophy, charges created by the transaction card and checks drawn against the
bank are accumulated by the bank and transmitted to the brokerage house. The brokerage house
establishes a credit limit against which each subscriber may use his transaction card and bank checks.
The credit limit applicable to each subscriber is in the most fundamental of terms the value of the
subscriber's free credit cash as represented by free cash in the brokerage account and by the
subscriber's short term investment(s), plus the remaining loanable value of the subscriber's securities. A
more precise statement of credit limit and the data processing methodology to determine same is set forth
below. Any income or receipts for the subscriber's account, e.g., dividends, interest, sale or redemption
proceeds from a securities account or the like, are applied to the overall subscriber's account in a
predetermined, hierarchal manner to offer the subscriber either a maximized return or a minimum interest
charge. In particular, any received or generated funds are first applied to reduce or eliminate any
subscriber overdrafts. Following this, the funds or any remaining portion thereof reduce the subscriber's
margin balance. Any excess as a general matter is then automatically invested for the subscriber in the
one or more short term investment vehicles which the subscriber has selected or is entitled to pursue.
Correspondingly, when funds are required of the subscriber to satisfy any transaction or check charges or
the like, they are obtained from the composite subscriber account in a hierarchal, priority sequence least
negatively impacting the customer. Such funds exceeding yet uncommitted brokerage account cash are
first obtained by liquidation of the appropriate short term investments. Any excess requirement is then
generated in the form of a margin loan against the subscriber's securities. Should this be insufficient, the
overage takes the form of an overdraft loan by the bank to the subscriber subject to the bank's discretion
and willingness to provide such an overdraft loan.
