A Certificate of Deposit (CD) is a type of account with a bank that typically offers a higher rate of interest than a regular savings account. CDs require the purchaser to invest a fixed sum for a fixed period of time; and, in return, the purchaser receives a fixed interest rate. A longer fixed period usually results in a higher interest rate. A brokered CD, however, is a CD that is purchased through either a brokerage firm or an independent salesperson.

A brokered CD can sometimes generate a higher interest rate if the deposit broker can bring in a certain amount of deposits to the institution, and can pass along the offer to their customers. Brokered CDs are typically more complex and tend to carry more risks than CDs issued by a bank. An investor may not be allowed to withdraw the money early without losing part of his principal.

A potential investor of a brokered CD should research the deposit broker to make sure he/she is legitimate. It is also important to know which bank is issuing the CD. Since the Federal Deposit Insurance Corporation (FDIC) has insurance limits, the CD may not be covered if the investor already has an account at the issuing bank. A potential investor will also need to ask if he/she owns the entire CD or if the investor is a part of a group and only owns a piece of the CD. This will also determine whether the CD is FDIC insured. The last thing a potential investor needs to consider is what penalties there are for early withdrawal.

As with any investment, brokered CDs come with potential risks. However, the possibility of higher yielding interest rates may be a good addition to an investor's portfolio.

For additional information, check out Raymond James Financial at http://www.raymondjames.com/liquid.htm or visit the Securities and Exchange Commission (SEC) Web site or the FDIC Web site.