The Canadian Investor Protection Fund (CIPF) is a not-for-profit corporation that protects the financial assets of investors who hold accounts at investment dealers that are CIPF members.
Should a CIPF investment dealer go bankrupt, the organization will reimburse its clients for financial losses they incur (up to a predetermined limit).
The CIPF was created by the Canadian investment industry in 1969 and is funded entirely by its member firms.
These firms are regulated by the Investment Industry Regulatory Organization of Canada (IIROC).
How Does the CIPF Work?
The CIPF is funded directly by its member firms which number around 200.
The CIPF Board determines the size of the fund required to ensure there’s adequate coverage in place for client assets.
It then assesses the amount each member firm has to pay based on the size of their client base and risk profile.
If you hold an account(s) at an investment dealer, you automatically qualify for coverage as long as:
- The account is with a firm that’s a CIPF member, and your details are documented in the firm’s records
- You’re not deemed ineligible based on criteria outlined in the CIPF Coverage Policy
If the member firm goes bankrupt and cannot return you the cash and other assets held in your account(s) you will be compensated.
Under the CIPF’s compensation rules, your protection is limited to the following amounts:
- Up to $1 million for general accounts combined, such as cash accounts, margin accounts, and TFSAs.
- Up to $1 million for registered retirement accounts combined, such as RRSPs, LIFs, and RRIFs
- Up to $1 million for registered education savings plans (RESPs)
Thus, the maximum coverage you can receive is $3 million if you hold assets across all three categories.
Keep in mind that these limits apply to each firm individually, so if you hold additional accounts at another investment dealer, you qualify for more than $3 million in protection.
The types of financial assets that qualify for coverage are:
- Futures contracts
- Segregated insurance funds
So, what happens if your investment dealer becomes insolvent and fails to return your cash, securities, and other assets?
In that case, the CIPF will step in to verify your eligibility, assess your compensation amount, and transfer your accounts to a new investment dealer.
The CIPF may appoint a trustee to oversee the claims process and ensure customers of the insolvent firm are reimbursed accordingly.
You’ll receive instructions on filing a claim against the firm’s estate from the trustee.
In cases where a trustee doesn’t participate in the claims process, you’ll need to submit your claim directly to the CIPF.
The organization will contact you to guide you through submitting a claim.
The CIPF will advise you in writing regarding the eligibility of your claim.
If you qualify, you should gain access to your money within 30 days.
You must submit your claim to the CIPF (or trustee, if the CIPF has appointed one) within 180 days of your investment dealer’s bankruptcy date.
Benefits of the CIPF
Saving money and growing your wealth is a long and arduous endeavour.
The last thing you want to worry about is suffering a catastrophic financial loss due to your investment dealer going bankrupt.
By maintaining your investment accounts with a CIPF accredited investment firm, you can rest easy knowing you’ll receive compensation if such an event were to occur.
You can focus exclusively on your long-term investment goals with confidence.
The coverage amount is also quite generous: the CIPF protects up to $3 million worth of financial assets (or $1 million per insured category) per member firm.
This amount is substantially more than the level of coverage provided by other financial institutions like banks and credit unions.
How to Verify if a Firm is a Member of the CIPF?
The most reliable way to verify if an investment dealer is a CIPF member is to visit the CIPF website and check if the firm is listed in the member directory.
What’s the Difference Between CDIC and CIPF?
Both the Canada Deposit Insurance Corporation (CDIC) and CIPF have similar roles and mandates, but there are some fundamental differences between the two organizations:
- Structure. The CIPF is a private corporation, while the CDIC is a crown corporation.
- Membership. CIPF members include only investment dealers, while CDIC members are banks, savings institutions, and federally-regulated credit unions.
- Coverage Level. CIPF coverage applies to three categories of accounts at a maximum of $1 million per category, for $3 million in total. In contrast, The CDIC coverage extends to seven categories of accounts at a maximum of $100,000 per category, for $700,000 in total.
- Type of Financial Assets Covered. The CIPF covers cash, securities, futures contracts, and segregated insurance funds held by member firms. Conversely, the CDIC covers only cash (domestic and foreign) and guaranteed investment certificates (GIC) held by member firms.
Did You Know?
The CIPF has an insurance policy to help it cover any shortfall when paying out clients of a dissolved member firm.
Frequently Asked Questions
- What does the CIPF do?
The CIPF protects investors’ cash, securities, and other eligible property held in accounts with investment dealers who are CIPF members. Should a member firm go bankrupt, the CIPF will compensate investors for any losses they suffer.
- What does CIPF cover?
The CIPF provides coverage for cash, securities, futures contracts, and segregated insurance funds held in cash accounts, margin accounts, and registered accounts like RRSPs.
- Is RBC a member of CIPF?
RBC subsidiary RBC Dominion Securities is a CIPF member, as its line of business is in investment and wealth management rather than general banking.