Some brokerage firms, known as deposit brokers, sell CDs. Brokered CDs sometimes have higher interest rates than traditional CDs because the brokerage firm can negotiate higher rates by guaranteeing to bring a large amount of deposits to the financial institution.
Brokered CDs can also be owned by multiple unrelated investors, unlike traditional CDs. Each investor will own a piece of the CD, which the broker manages. Nonetheless, each portion of the CD can still qualify for normal FDIC insurance as long as the account records indicate that the broker is an agent for multiple customers.
Brokered CDs are also special because the contributors may not have to pay penalties for early withdrawal of their principal. This is possible because the broker can simply resell ownership of the CD to another investor if the initial investor wants out.
Investors should be aware, however, that deposit brokers do not have to receive any licensing or certification and that no federal or state agency examines or approves them.