The bigger issue is malfeasance whereby a brokerage undertakes an effort to break the rules and uses client assets in their own corporate operations, or as corporate collateral, and hence where I believe the real value of CIPF shines. I would be more concerned about that with upstarts and lesser boutique firms that are likely more capital lean and in accelerated growth mode rather than the brokerages of the big banks which have their compliance departments breathing down their necks.

There will be an indicator in the monthly brokerage account statements on holdings that are in client name form and/or not segregated.

That's why CIPF insurance is needed for investment dealer accounts. Statements may show that the dealer owes you a $50,000 Concentra Bank GIC and an $80,000 MCAN Mortgage Corporation GIC. But, the bankruptcy trustee may not find the same when it contacts Concentra and MCAN.

zgic said
Are RBC Direct Investing and Questrade fintechs?
They are placing our GICs at other banks. So which situation is this #1 or #2?  

RBC Direct Investing and Questrade are investment brokers rather than “fintechs”. For GICs the relevant CDIC rules are the broker-deposit rules. A broker can place a GIC either in client name (similar to #1) or in nominee name, in which case CDIC expressly treats the broker as trustee and the client as beneficiary (#2). So you need to check how your particular GIC is registered.

That's not the case for Situation #2: The fintech deposits your money in trust at a member institution and names you as a beneficiary:

What happens if the fintech fails?

CDIC would not play a role in this process. The fintech will be subject to a conventional bankruptcy and liquidation process, but in this example [any of] your funds [still at the member institution] will stay in trust at the member institution where they were deposited.

Looks like we have some official language to reference now, including:

The fintech places your money in an account under your name at a member institution.

What happens if the fintech fails?

If the fintech fails, your money is not affected because you are the owner of the account at the CDIC member institution. Since the account is held in your name, it is not part of the fintech’s assets and won’t be used to pay any of its creditors. To access your funds, you must know what bank holds them. If you’re not sure where the account is held, contact your fintech.

The fintech deposits your money in trust at a member institution and names you as a beneficiary.

What happens if the fintech fails?

CDIC would not play a role in this process. The fintech will be subject to a conventional bankruptcy and liquidation process, but in this example your funds will stay in trust at the member institution where they were deposited.

When you’re not covered – the fintech places your money in an account in the fintech’s name.

What happens if the fintech fails?

CDIC would not play a role in this process. The fintech will undergo a conventional bankruptcy and liquidation process.

Freedom said

The highest CDIC savings account on the chart seems to be Oaken at 2.8%.

Is a savings account backed by CIPF riskier than one backed by CDIC? Since they're paying less than 2.8%, if it were riskier, seems like the rate would have to be higher to compensate.  

There are other factors, like convenience. Wealthsimple does pretty much everything now, and much of it is done better than competing FIs. One-stop shop. Oaken is just a savings platform. If you don’t expect to touch the money frequently and it's under $100K then Oaken has advantages. Also, these rates are variable so things could change.

savemoresaveoften said
So the generation chequing account earns 2.25% and CDIC protected. This new savings account 2.5% is CIPF protected. A gain of 0.25% vs chequing account but not CDIC the only diff ?  

The highest CDIC savings account on the chart seems to be Oaken at 2.8%.

Is a savings account backed by CIPF riskier than one backed by CDIC? Since they're paying less than 2.8%, if it were riskier, seems like the rate would have to be higher to compensate.

Johnny

Dean

Ah, the L-1011, my favourite plane!