Does anyone know what type of CDIC reserves the Canadian government has?

If you look for FDIC reserves there are several numbers available for the amount of actual “cash” in the reserves. But I can’t find this number for Canada.

@mfd, I’m not calling you a liar, I’m actually just wondering what the numbers are.

Anyone have any idea?

Answer: people who don’t want to lose their money when the global financial crisis really starts to heat up.

Don’t be caught with your pants down; I wouldn’t put 1 extra dollar past the insured amount into an institution these days (no matter where they are).

Even with CIPF, investments at a brokerage are at greater risk from a bankruptcy than with a financial planning/mutual fund firm.

Investments can be held 2 ways – in your name or in the investment dealer’s name. Financial planners usually put your investments in your name with the mutual fund company. So, if planning firm goes bankrupt, there is no consequence, since they hold none of your money. Your money is all in the mutual fund invested in your name.

Brokerage firms usually hold your investments in their name. So, if the brokerage firm goes bankrupt, you are an unsecured creditor of the brokerage firm. Your claim comes after anyone that lent money to them.

This means your account is held frozen until the bankruptcy of the brokerage firm is finalized or until CIPF can sort out your account.

A few small brokerages have gone bankrupt in the last decade. A couple of our clients had old accounts with them and told us their account was frozen for a year. They could not trade or access their account in any way.

For example, if you invest at Questrade and use GlobeInvestor to track your investments, and CIPF covers Questrade, which one’s bankruptcy would concern you more?

A planning firm might have a “trust” account for making the purchase, but once the purchase is made, they are only an impartial tracker of the investments similar to GlobeInvestor.

Mutual funds are also required to keep their money separate from the fund itself. So, if the mutual fund firm goes bankrupt, it does not normally affect you, since your money is invested in the fund.

For example, you deal with ABC Financial Planner who works through DEF Mutual Fund dealer and invest in GHI Mutual fund into the GHI Canadian Equity fund which owns 50 companies in Canada. If ABC, DEF or GHI go bankrupt, it should not affect you. They don’t hold any of your money. Your money is held in GHI Canadian Equity Fund invested in 50 companies. The only real risk to you is if those 50 companies go bankrupt.

If you invest with JKL Discount Broker and invest in GHI Canadian Equity Fund, your money is invested in the name of JKL Disount Broker. If they go bankrupt, you are an unsecured creditor of JKL. It is also invested in GHI Canadian Equity Fund in the 50 companies, so bankruptcy of the 50 companies also affect you.

Ed

What other insurers would be recognized by CDIC?

I’m also curious how they can get $3 million insured? From the sounds of it different departments from your institution are individually insured by CDIC ?

I can see a couple with an individual non- registered account each with $100k in each, 2 individual rrsp accounts with 100k each, and then a joint account with 100k. Now I guess they could start setting up trusts for each other and joint accounts with their kids but at that point it might just be easier to go with another institution.

If you had $1 million in cash, then you could spread it out over 10 banks, OR you could simply deposit the lump sum into a discount brokerage account covered by CIPF.

Best Regards,

Dividend Growth Investor