Response to inquiries regarding Synapse Technology

In the spring of 2024, a financial technology intermediary called Synapse Technology entered bankruptcy, resulting in loss of access to (and potential financial loss of) their customers’ cash deposits. Given this news, we wanted to take the opportunity to explain how the Flourish Cash program† operates in a highly-controlled, highly-audited, and highly-regulated manner, which — based on public reporting and bankruptcy proceedings — stands in stark contrast to Synapse.

With respect to our fundamentally different operating model, the Flourish Cash program is not unique: there are hundreds of billions of dollars in programs that are operationally similar to Flourish Cash at the largest broker-dealers in the world, such as Charles Schwab and Fidelity.

Flourish has no relationship with, or exposure to, Synapse

Flourish has absolutely no relationship with Synapse, nor have we ever worked with Synapse. As such, their collapse has zero impact on our business. Further, we have never experienced any similar or related issues with respect to account holders’ access to funds or continuity in service. Our customers have, and always have had, complete access to their cash.

Based on publicly-available information and reporting, Synapse operated a "banking as a service" model that allowed third-party entities to use Synapse's technology to offer various financial products, relying on Synapse's opaque relationship with a small group of banking partners. The business, and Synapses' failure, was described by a bankruptcy judge as "very, very unusual" given the uncertain regulatory status of much of Synapse's business, including reports that end clients did not know whether, or with whom, Synapse had placed their money. Additionally, the bankruptcy proceedings pointed to a dramatic lack of controls and "gross mismanagement," all of which together put customer funds at risk. 

The Flourish Cash program

Flourish Cash was designed to provide clients with a competitive interest rate on their cash and significantly more FDIC insurance coverage^Ω through our Program Banks than a single bank account can offer. We are not a bank, but the money that clients transfer to their Flourish Cash account is automatically deposited at our FDIC-member Program Banks, such as PNC Bank & HSBC Bank USA.

Flourish Cash is a cash sweep program run through Flourish Financial LLC, which is an SEC and FINRA registered broker-dealer. You can find our BrokerCheck page here, showing approval to operate nationwide and with an overall clean bill of health.

From a flow-of-funds perspective, Flourish Cash leverages PNC Bank as our “Operating” or “Processing” bank. What that means in practice is that when customers deposit funds with Flourish Cash, those funds are transferred directly from the client’s bank or brokerage account into an operating account at PNC Bank; from there, the funds are wired directly to our underlying Program Banks, typically within a few hours, where they are held in omnibus accounts that are explicitly titled for the exclusive benefit of our customers. Flourish Financial LLC is responsible for running the program, including keeping accurate customer ledgers and directing the transfer of funds. There are no other intermediaries involved.

Flourish Financial LLC sends out monthly statements that tell every customer exactly how their funds are allocated across our Program Banks; customers can also call in to request this information at any time. Customer funds are always held as cash, and are not invested in money market funds or other investment products that have a risk of market loss. Across the program, assets and liabilities are matched dollar for dollar; all customer funds are held on deposit at the underlying Program Banks. There is no underlying investment product, lock-up or “leverage” in the system; customer funds simply sit in cash, on-deposit at our FDIC-member bank accounts. That means that, if needed, Flourish could return every single penny to clients on the same day.  

A highly-regulated, audited, and controlled environment

Below is an overview of the audits and controls around how Flourish manages its cash sweep business, particularly concerning how Flourish treats and records client assets placed with its network of Program Banks, and how KPMG independently verifies the balances held at our underlying Program Banks as part of our annual Independent Financial Statement Audit (SEC Rule 17a-5).

SEC and FINRA regulations

As an SEC and FINRA-registered broker-dealer, Flourish Financial LLC is subject to extensive legal and regulatory requirements concerning the ongoing functioning of its sweep program, specifically with regard to the manner in which customer funds are placed with our Program Banks. Among other things, SEC rules require Flourish to monitor the movement of customer funds into and out of Program Banks on a real-time basis, conduct daily reconciliation of the amount of customer deposit balances at each Program Bank, and preserve its records of customers’ positions in an approved and auditable ledger format. 

Internal Audit

To operate the day-to-day workings of the cash sweep program, and to discharge our legal and regulatory obligations appropriately, Flourish has a designated Treasury and Operations team.  Among the functions of that team is to oversee the balances held at the Program Banks. Formal controls and processes exist to ensure that the team properly executes this oversight function. Among other things, the Treasury and Operations team performs daily reconciliations of the balances held at the Program Banks. Any items requiring attention are immediately investigated until resolved.

The monitoring and reconciliation process is included within the scope of Flourish’s annual internal audit examination, meaning that Flourish conducts its own annual internal review of how the Treasury and Operations team discharges its functions. Since Flourish’s inception, no deficiencies have been identified.

Independent Financial Statement Audit (17a-5)

As a broker-dealer, Flourish is required to have an independent accounting firm conduct an annual audit of our financials. The results of the most recent audit of the broker-dealer’s statement of financial condition, which was conducted by KPMG, are available here. While that balance sheet does not directly reference the underlying Program Bank balances, the design of the Flourish Cash program, including how funds are swept to our underlying Program Banks, is extensively described in the “Notes to Statement of Financial Condition.”

As part of the included opinion letter, KPMG found that Flourish’s statement of financial condition and related notes — including those that describe how funds are swept to our underlying Program Banks — present fairly, in all material respects, the financial position of the broker-dealer at the end of its fiscal year. In order to make that determination, KPMG independently confirms the accuracy of the balances held at each of Flourish’s Program Banks to validate the accuracy of the balances held at those banks. KPMG confirmed the balances for our most recent audit as of December 31, 2023, without exception. 

SOC 2 Audit

Flourish (inclusive of Flourish Financial LLC and its affiliates Flourish Digital Assets LLC and Flourish Technologies LLC) engaged KPMG to perform a SOC 2 Type 2 examination of our controls and processes relevant to security, availability, and confidentiality. You can read a summary of our SOC 2 Type 2 examination here. KPMG found that the description of Flourish’s services was accurately presented and that the controls stated in the description were suitably designed and operated effectively, throughout the period under review, to provide reasonable assurance that Flourish’s service commitments to end-users were achieved. We can share a copy of the SOC 2 Type 2 upon request with RIAs upon execution of an NDA.

Final thoughts & additional resources

The safety of our customer funds is our number one priority. As we have shown above, we operate within a highly-controlled, audited and regulated environment; a focus on risk management is central to our company’s core values. 

We wanted to provide a few final resources that may be helpful in evaluating and understanding our program.

• Flourish is owned by MassMutual.^∞ Founded in 1851, MassMutual is one of the largest and most financially stable institutions in the United States. Flourish operates as a standalone business within MassMutual, independent from MassMutual’s existing wealth management and insurance businesses.
• Learn more about our Bank Due Diligence Process
• Read about the Flourish Cash business model
• For more information about how the program works, please see our Account Agreement (in particular, starting on page 15 of the document)
• The Flourish broker-dealer is a member of the Securities Investor Protection Corporation (SIPC). That means that in the event that Flourish should fail, the SIPC or its court-appointed trustee would oversee the wind-down of the broker-dealer and the orderly disposition of any funds held for clients.  You can find more information about the SIPC and its processes here
• The Securities and Exchange Commission has written a detailed overview of cash sweep programs. 
• For more details on FDIC coverage, visit https://www.fdic.gov.