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November 19, 2022
4:36 pm
Doug
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HermanH said
I'm not sure you are interpreting the chart correctly. I believe that they have set it up as an example.

The example shows a total deposit of $265,000 consisting of:

Account Details ................................Amount ..Covered..Not Covered
Chequing account in your name.....$20,000 $20,000
Savings account in your name.......$45,000 $45,000
Term deposit maturing in 5 years..$200,000 $185,000 $15,000
Total deposits...................................$265,000 $250,000 $15,000

The $15,000 in excess of the $250,000 coverage just happens to be the last item on the list.

I believe that if someone held only $250,000 in GIC, he would be completely covered.

All deposit accounts – the combined total of each member’s chequing, savings and term deposit accounts – are covered up to $250,000, including principal and interest.
https://www.nscudic.org/coverage/faq/

  

That chart is a bit confusing, but looking at the NSCUDIC coverage information, it looks to be very similar to the way FSRA (nee DICO) and CDIC insurance work. It's $250,000 per depositor (or business entity, in the case of business deposits). This is basically the same as CDIC insurance, really. The fact that you might have a $50,000 term deposit, $40,000 in a savings account, and $30,000 in a chequing account, that doesn't mean the term deposit is fully insured. It just means that $20,000 (and any accrued and unpaid interest) is not fully insured. In practical terms, though, no one has ever lost a dollar of insured and uninsured CDIC-backed deposits since it's inception (someone can correct me, with full citations in any citation style of your choosing, if I'm wrong). RRSP and similar account types are insured separately to $250,000 each.

Cheers,
Doug

November 19, 2022
6:42 pm
Loonie
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I don't think it's at all the same as FRSA or CDIC.
This one is indeed per depositor, but FRSA and CDIC are per depositor per category, which is quite different. Further, FRSA has unlimited insurance for registered accounts but is limited for non-registered.

I think it's best to consider this one on its own merits.

November 19, 2022
7:34 pm
Doug
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Loonie said
I don't think it's at all the same as FRSA or CDIC.
This one is indeed per depositor, but FRSA and CDIC are per depositor per category, which is quite different. Further, FRSA has unlimited insurance for registered accounts but is limited for non-registered.

I think it's best to consider this one on its own merits.  

That's not how I read it. This is also by type. Fair enough regarding the FSRA differentiation regarding registered accounts (I'd forgotten that; wasn't aware of that).

CDIC chequing, savings, and GICs are still one category—same thing here, no?

Cheers,
Doug

November 19, 2022
7:35 pm
hwyc
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Seems going thru a deposit broker, one can circumvent the "Open An Account" criterion?

CUA is a provincially regulated credit union—to be eligible to become a member of CUA you must be a resident of Nova Scotia

November 19, 2022
7:44 pm
Doug
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hwyc said
Seems going thru a deposit broker, one can circumvent the "Open An Account" criterion?

CUA is a provincially regulated credit union—to be eligible to become a member of CUA you must be a resident of Nova Scotia

  

Ah, yes, I forgot that Credit Union Atlantic operates more like the Desjardins model whereby the credit union central is the consumer-facing entity, and individual credit unions are the back end, if you will, from a governance and financial reporting perspective. Actually, it might differ from Desjardins in that respect—I think Nova Scotia only has one credit union, which is both the central and credit union called Credit Union Atlantic.

Cheers,
Doug

November 19, 2022
7:48 pm
Doug
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Doug said

That's not how I read it. This is also by type. Fair enough regarding the FSRA differentiation regarding registered accounts (I'd forgotten that; wasn't aware of that).

CDIC chequing, savings, and GICs are still one category—same thing here, no?

Cheers,
Doug  

Interesting, looking at the Credit Union Act's Credit Union Regulations, it says coverage is to a maximum of $250,000 per member (permalink). Somehow they lump joint account deposits within the same membership, according to this link (not sure how that works! Sounds like a clusterf*ck waiting to happen, if you ask me!). However, according to that same link, they very clearly say one's RRSP, TFSA, and RRIF are each insured separately, so it's almost like they're treating those as separate memberships.

Cheers,
Doug

November 19, 2022
8:40 pm
Loonie
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If nothing else, I think we've made it clear that one needs to be careful about insured limits with NS CUs!
It might be wise to contact the insurer directly for clarification before making a deposit, including through a deposit broker.

November 19, 2022
9:56 pm
frugal lady
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Earlier this week DUCA was one of the institutions offering the 3-5 year rates available through GIC Wealth. I do not have an account with DUCA.
On the FSRA site it says: "The moment you become a credit union member and make a deposit, your insurable deposits are protected." and " To be eligible for deposit insurance coverage, you must be a member of the credit union or caisse populaire."

So if I am not a "member" of DUCA and buy a GIC through GIC Wealth, would I be eligible for deposit insurance coverage?

November 19, 2022
10:36 pm
Loonie
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I am not a lawyer, but the wording you have cited seems pretty clear to me, and says that you would NOT be eligible if not a member.
I AM a member of DUCA. As a member, one votes at AGMs, can login to DUCA, and receives annual patronage rewards typically amounting to 2% of interest earned in the previous year. I doubt very much if any of this would be available to you through a purchase at GICWealth.

I am a fan of GICWealth, but you raise an excellent point.

I suggest, that, to cover yourself, if you buy a DUCA GIC from a deposit broker, that you also take out, independently, a membership in the credit union. The rules as you have posted don't say that the membership and the GIC have to be done together. This would apply to any Ontario CU.

November 19, 2022
11:33 pm
Norman1
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A DUCA membership could have been created when the funds are placed through a deposit broker.

Also, according to Credit Unions and Caisses Populaires Act, 2020, subsection 218(6), one has to be a member when one makes the deposit but one does not have to remain a member for the deposit to be insured:

Insurance continues after member withdraws, etc.

218 (6) For greater certainty, the obligation to insure an insurable deposit of a member of a credit union continues after the member withdraws or is expelled.

A membership could be have been opened to place the GIC and closed immediately afterwards. sf-laugh

November 20, 2022
9:07 am
Loonie
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"Could" is a weighty word in this context.
I don't see how anyone could legitimately join a CU without knowing it and without paying the fee, signing documents to do so, and receiving a membership number.
So, the question is, has anyone who bought such a GIC through a broker and who did not already belong to the CU in question been presented with such documents to sign? Has any such person ever had a membership number?
Technically, memberships have to be approved by the CU, although I think this is not much of an issue normally.

If push came to shove and you had to avail yourself of the insurance, how would you prove you'd been a member when you bought the GIC if you never had a membership number? I doubt the CU wants one-day memberships, which would be a lot of extra processing work but it does want to sell the GICs.

Under normal circumstances, if you were a member and bought a GIC in the usual way, your membership would continue until at least the end of the GIC. They are not going to terminate your membership and refund that fee while you still have products with them.

Norman's proposal, while clever, still sounds fishy to me. I would want to see the membership number.

Does anyone know if DICO had similar language about membership, or is this new?

November 20, 2022
12:11 pm
Doug
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Loonie said
"Could" is a weighty word in this context.
I don't see how anyone could legitimately join a CU without knowing it and without paying the fee, signing documents to do so, and receiving a membership number.
So, the question is, has anyone who bought such a GIC through a broker and who did not already belong to the CU in question been presented with such documents to sign? Has any such person ever had a membership number?
Technically, memberships have to be approved by the CU, although I think this is not much of an issue normally.

If push came to shove and you had to avail yourself of the insurance, how would you prove you'd been a member when you bought the GIC if you never had a membership number? I doubt the CU wants one-day memberships, which would be a lot of extra processing work but it does want to sell the GICs.

Under normal circumstances, if you were a member and bought a GIC in the usual way, your membership would continue until at least the end of the GIC. They are not going to terminate your membership and refund that fee while you still have products with them.

Norman's proposal, while clever, still sounds fishy to me. I would want to see the membership number.

Does anyone know if DICO had similar language about membership, or is this new?  

This is an interesting discussion. I agree with Loonie here that could is the key word in this context.

I suspect one of two leading theories are at play here:

- Either the deposit broker completes a membership application as part of the GIC application, possibly paying the membership share requirement for their client with an agreement with the credit union it be refunded to the deposit broker when all GIC(s) are collapsed/matured; or,
- The deposit broker themselves has a corporate membership with the credit union, and, as part of that deposit broker relationship with the credit union, enables them to open GICs on behalf of clients and the deposit guarantee is thus extended to those GICs.

You would want to read the full text of any deposit broker/client agreements, membership application, and GIC application. It's a good question, but I suspect the answers could be found from phoning the credit union.

Credit unions have deposit broker businesses; some even participate in FundSERV. I can't imagine a situation where deposit guarantees do not extend to brokered GICs.

Cheers,
Doug

November 20, 2022
12:35 pm
HermanH
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Loonie said
I don't see how anyone could legitimately join a CU without knowing it and without paying the fee, signing documents to do so, and receiving a membership number.
So, the question is, has anyone who bought such a GIC through a broker and who did not already belong to the CU in question been presented with such documents to sign? Has any such person ever had a membership number?
Technically, memberships have to be approved by the CU, although I think this is not much of an issue normally.

I bought a DUCA GIC via broker and did not know of this potential requirement. I bought it in the expectation that I would not have been allowed to purchase it, if I did not fulfill membership criteria. I will be double-checking with both DUCA and the broker over FSRA coverage next week. I just don't see how they can sell me something that I might not be allowed to own.

I vaguely remember asking the broker about some Ontario CU GICs, but was told that I could not purchase them in Alberta. Thus, I was operating under the same premise that if I tell them I am in Alberta and they were offering a GIC to me, I must meet the requirements. He told me the NS CUAtlantic rates, but did not explicitly say if I could or could not purchase them.

November 20, 2022
12:42 pm
COIN
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HermanH said

I bought a DUCA GIC via broker and did not know of this potential requirement. I bought it in the expectation that I would not have been allowed to purchase it, if I did not fulfill membership criteria. I will be double-checking with both DUCA and the broker over FSRA coverage next week. I just don't see how they can sell me something that I might not be allowed to own.

I vaguely remember asking the broker about some Ontario CU GICs, but was told that I could not purchase them in Alberta. Thus, I was operating under the same premise that if I tell them I am in Alberta and they were offering a GIC to me, I must meet the requirements. He told me the NS CUAtlantic rates, but did not explicitly say if I could or could not purchase them.  

Interesting. So, you bought a DUCA GIC without being a member and without paying the membership fee?

November 20, 2022
12:45 pm
HermanH
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COIN said
Interesting. So, you bought a DUCA GIC without being a member and without paying the membership fee?  

I bought through GICWealth and was never asked about membership.

November 20, 2022
12:58 pm
GR
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Here is what I've been told by the broker (Monarch Wealth) regarding GICs they offer from credit unions. The credit union puts up the membership share(s) on behalf of the purchaser for the duration of the GIC term. Of course, the "cost" of the membership share is not refundable to the client/member.

November 20, 2022
1:14 pm
Loonie
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Thanks for the report, Herman.
I think the question for the consumer though is not so much whether they are allowed to buy the GIC but whether they are insured if they do.
The purchase is by agreement between the CU and the broker, but insurance is under the control of FRSA.
The purchase evidently has some provision that allows purchase without membership (or without being told you've got a membership, which makes no sense).

As to Doug's point, I can see where some sort of group or corporate purchasing might occur as the CU clearly wants to and does sell product through this channel, but I don't see that this gives the purchaser the qualification of "member", which is required by FRSA. This causes me to revert to my earlier points above - "no ticky, no entry".
It may seem reasonable to us to assume that some sort of membership must have been created, but it's precisely on points like this that it could fail legally, on the "show me" test. As I hear it, Herman has no proof that he ever joined DUCA, by proxy or not. Insurers are always on the lookout for ways to disqualify people.

A while ago on this forum an issue came up where an Ontario CU got all upset when a member decided to buy one of their GICs from a broker and somehow penalized the member, saying they weren't allowed to do this. I'm thinking perhaps there is a connection between that and the current dilemma. Perhaps that meant they had two memberships??? - which the by-laws of the CU would not allow.

ADDED: I suspect it is almost certainly required by by-laws that members pay their own membership/ownership share fee.
The idea that anyone could sign you up to join a CU without your knowledge or consent seems quite wrong to me. Maybe it's in the fine print?
It's also likely that the insurance aspect has never been tested in court. If the membership qualification is new (i..e. did not exist under DICO), then it certainly has not been tested.
There is a lot we don't know here.

November 20, 2022
1:33 pm
Loonie
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Question for Norman1: Do you have special knowledge that your scenario is in fact what occurs or are you just guessing?

November 20, 2022
1:57 pm
savemoresaveoften
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Loonie said
A while ago on this forum an issue came up where an Ontario CU got all upset when a member decided to buy one of their GICs from a broker and somehow penalized the member, saying they weren't allowed to do this. I'm thinking perhaps there is a connection between that and the current dilemma. Perhaps that meant they had two memberships??? - which the by-laws of the CU would not allow.

ADDED: I suspect it is almost certainly required by by-laws that members pay their own membership/ownership share fee.
The idea that anyone could sign you up to join a CU without your knowledge or consent seems quite wrong to me. Maybe it's in the fine print?
It's also likely that the insurance aspect has never been tested in court. If the membership qualification is new (i..e. did not exist under DICO), then it certainly has not been tested.
There is a lot we don't know here.  

Once investor A buys a GIC thru a broker, the CU will have investor A's info on file , basically a membership with the CU I believe (this is the only way the GIC can be registered to A's name.) If A then try to buy another GIC direct with the said CU, it will trigger an alarm and wont be "allowed". Any subsequent dealing with that particular CU has to be done thru the broker, unless of course there is no outstanding GICs on the book I believe.

November 20, 2022
2:14 pm
Loonie
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I agree that the CU will have the purchaser's profile, but does that make them a "member" legally?
I can buy any number of GICs at, say, WealthOne, with and without broker (as far as I know - never tried) but there is no membership to consider and I doubt they are going to make a fuss if I use two channels. And CDIC doesn't care.

I'm not really sure why the CU should care either.

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