There’s a new kid on the block in the world of financial protections for Canadians. As of January 1st, 2023, the Canadian Investor Protection Fund (CIPF) has been put in place to protect Canadian investors and their investment accounts.
What is CIPF?
To put it simply, CIPF is there to support investors who lose money because of their investment dealer, mutual fund dealer or trade marketplace going insolvent. Essentially, it’s similar to the Canadian Deposit Insurance Corporation, but instead of protecting bank accounts, CIPF protects investment accounts.
While the current CIPF is new, it’s actually a revised version of the organization. Previously, there were two separate organizations, the (former) CIPF and the Mutual Fund Dealers Association of Canada Investor Protection Corporation (MFDA IPC). The two organizations were combined to create the current CIPF.
What does it cover?
CIPF doesn’t cover all investment accounts or all loss scenarios. There are guidelines as to which investments and situations are protected by CIPF. While there are more, the two main guidelines are:
- Investment accounts must have been managed by an organization with an active membership to the Canadian Investment Regulatory Organization (CIRO).
- The loss must be due to the CIRO member organization going insolvent. It does not cover losses due to such things as bad advice, market downturn, or fraud.
CIPF covers up to a combined $1 million in cash, securities, or property loss as a result of a CIRO member going insolvent. It will cover another $1 million in registered accounts such as Registered Retirement Savings Accounts and Registered Retirement Income Funds combined. Finally, they will cover yet another $1 million in Registered Education Saving Plan funds.
The nice part is that this is not a shared amount. If you have an investment account in more than one member organization you are covered up to these amounts for each organization.
Who does it cover?
These funds are available to all CIRO Member clients. The CIPF website has a list of all their member organizations. There’s no cost or need to enroll on the part of the client. By being a member’s client, Canadian or otherwise, you are automatically protected.
How often does this happen?
Fortunately, regulations and oversight have gotten much better so it’s very rare that an investment organization goes insolvent. In fact, the CIPF website only lists 21 insolvencies, the last occurring almost 10 years ago in 2015.
What to do if your organization goes insolvent
On the rare occasion of insolvency, the best course of action is to contact the CIRO. They will be able to update you on what’s happening with your investments. Member insolvencies are dealt with in a few different ways. Most often, a trustee will be appointed to administer the transfer of the insolvent organization’s client investment accounts. The trustee will coordinate contacting the clients. Sometimes clients will play a role in transferring their account to a new organization, other times the transfer happens before the client knows about it. In those circumstances where the transfer happens automatically, the client will be given the option to move their account to the organization of their choosing later.
Pay attention to any updates. You must make a claim within 180 days of insolvency.
How is CIPF funded?
To maintain active members CIPF member organizations pay dues. These dues go towards operating costs and to pay out claims.
Final thoughts
As great as it is that these protections are in place, as mentioned earlier, they do have monetary and qualifying limitations. If you’re struggling to get your finances back on track after your investment accounts have taken a hit our expert credit counsellors can help. Call one today for a free consultation.
