CDIC protection for WS Cash accounts increased to 500K | Page 3 | Wealthsimple | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
CDIC protection for WS Cash accounts increased to 500K
April 6, 2024
12:57 pm
phrank
Member
Members
Forum Posts: 315
Member Since:
January 3, 2009
sp_UserOfflineSmall Offline

savemoresaveoften said

hmmm so WS is mis interpreting the coverage, or that its a grey idea of what WS said re CDIC coverage.
Unless the WS payment account balance are completely segregated and can not be used by WS at all, its 100% not safe in a sense...  

I feel they are misrepresenting it to customers vs misinterpreting it.

April 6, 2024
1:00 pm
InterestThis
Member
Members
Forum Posts: 303
Member Since:
November 5, 2022
sp_UserOfflineSmall Offline

It's pretty bad when people are misrepresenting how WS is set up, saying things that are incorrect, and accusing WS essentially of fraudulent misrepresentation. But it's up to WS to explain it more clearly, but for those with a certain mindset, they won't even believe facts.
That is why you don't listen to the free medical or financial advice of unlicensed people posting on the internet.

April 6, 2024
1:05 pm
Loonie
Member
Members
Forum Posts: 9308
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Correct me if I'm wrong, but I think what you are saying, Norman, is that the word "trust" means something here. We are trusting WS (Payments Inc?) to have our money always invested in a CDIC member with us listed as the beneficiary. All is well and good as long as they in fact do this.
By the same token, if their business is in trouble, they may decide to "borrow" from us without our knowledge. That would probably be illegal, but not impossible.
As we are kept in the dark as to exactly where our money has been placed, we are always at a disadvantage in trying to protect ourselves.

I seem to recall news stories of lawyers occasionally absconding with trust funds.

This is different from having a regular bank account in that if, for example, TD Bank were to be unable to give you back your money, CDIC would be directly responsible to you for that money.

April 6, 2024
1:17 pm
mordko
Member
Members
Forum Posts: 889
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

Loonie said
Correct me if I'm wrong, but I think what you are saying, Norman, is that the word "trust" means something here. We are trusting WS (Payments Inc?) to have our money always invested in a CDIC member with us listed as the beneficiary. All is well and good as long as they in fact do this.
By the same token, if their business is in trouble, they may decide to "borrow" from us without our knowledge. That would probably be illegal, but not impossible.
As we are kept in the dark as to exactly where our money has been placed, we are always at a disadvantage in trying to protect ourselves.

I seem to recall news stories of lawyers occasionally absconding with trust funds.

This is different from having a regular bank account in that if, for example, TD Bank were to be unable to give you back your money, CDIC would be directly responsible to you for that money.  

This is no different from a regular bank stealing from your account. CDIC does not cover fraud.

April 6, 2024
2:51 pm
phrank
Member
Members
Forum Posts: 315
Member Since:
January 3, 2009
sp_UserOfflineSmall Offline

InterestThis said
It's pretty bad when people are misrepresenting how WS is set up, saying things that are incorrect, and accusing WS essentially of fraudulent misrepresentation. But it's up to WS to explain it more clearly, but for those with a certain mindset, they won't even believe facts.
That is why you don't listen to the free medical or financial advice of unlicensed people posting on the internet.  

I agree with you that they need to better explain it.

April 6, 2024
3:14 pm
Norman1
Member
Members
Forum Posts: 6910
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

savemoresaveoften said

hmmm so WS is mis interpreting the coverage, or that its a grey idea of what WS said re CDIC coverage.
Unless the WS payment account balance are completely segregated and can not be used by WS at all, its 100% not safe in a sense...

That's correct. Wealthsimple's marketing is trying to make it look like one has CDIC coverage on one's balance in a Wealthsimple Cash account when one does not.

That's why Understand how CDIC coverage works in your Cash account says one will be dealing with Wealthsimple's bankruptcy trustee and not CDIC should Wealthsimple fail:

What happens if Wealthsimple goes out of business?

In the improbable event that Wealthsimple goes out of business, client funds are to be recovered in accordance with Canadian bankruptcy laws and proceedings.

April 6, 2024
3:30 pm
Norman1
Member
Members
Forum Posts: 6910
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Loonie said
Correct me if I'm wrong, but I think what you are saying, Norman, is that the word "trust" means something here. We are trusting WS (Payments Inc?) to have our money always invested in a CDIC member with us listed as the beneficiary. All is well and good as long as they in fact do this.
By the same token, if their business is in trouble, they may decide to "borrow" from us without our knowledge. That would probably be illegal, but not impossible.

I seem to recall news stories of lawyers occasionally absconding with trust funds.

Shortfall in client assets, however caused, is a risk with these kind of trust or in-trust arrangements. Doesn't really matter how the shortfall came about. Illicit borrowing by the business. Rogue employee skimming funds and tampering with internal account records. Clients will be taking a haircut if there's no coverage for shortfalls that are not the result of the failure of the bank used by the business.

That's why investment dealers like BMO InvestorLine and Scotia iTRADE have CIPF coverage.

April 6, 2024
3:37 pm
mordko
Member
Members
Forum Posts: 889
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

“Wealthsimple Investments Inc., is a member of the Canadian Investment Regulatory Organization (CIRO) which means the cash balance held within customer accounts is protected by the Canadian Investor Protection Fund (CIPF)”. Investments at WS have the exact same insurance as at BMO et al.

Illicit borrowing and actions of rogue employees in relation to HISA (rather than investment) accounts are not protected under CDIC insurance regardless of which institution your HISA is with. You can read this on CDIC’s own website in plain English, so not a disadvantage for WS.

April 6, 2024
4:39 pm
Norman1
Member
Members
Forum Posts: 6910
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

mordko said
“Wealthsimple Investments Inc., is a member of the Canadian Investment Regulatory Organization (CIRO) which means the cash balance held within customer accounts is protected by the Canadian Investor Protection Fund (CIPF)”. Investments at WS have the exact same insurance as at BMO et al.

Illicit borrowing and actions of rogue employees in relation to HISA (rather than investment) accounts are not protected under CDIC insurance regardless of which institution your HISA is with. …

Both false.

Balance in Wealthsimple Cash account is with Weathsimple Payments Inc., not Wealthsimple Investments Inc.

Doesn't matter how a CDIC member fails. CDIC covers the insured account balance when member fails. Doesn't matter that CDIC won't cover balance lost when a member doesn't fail and funds were lost for some other reason.

April 6, 2024
4:59 pm
mordko
Member
Members
Forum Posts: 889
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

Norman1 said

mordko said
“Wealthsimple Investments Inc., is a member of the Canadian Investment Regulatory Organization (CIRO) which means the cash balance held within customer accounts is protected by the Canadian Investor Protection Fund (CIPF)”. Investments at WS have the exact same insurance as at BMO et al.

Illicit borrowing and actions of rogue employees in relation to HISA (rather than investment) accounts are not protected under CDIC insurance regardless of which institution your HISA is with. …

Both false.

Balance in Wealthsimple Cash account is with Weathsimple Payments Inc., not Wealthsimple Investments Inc.

Doesn't matter how a CDIC member fails. CDIC covers the insured account balance when member fails. Doesn't matter that CDIC won't cover balance lost when a member doesn't fail and funds were lost for some other reason.  

Both true. If you were to actually read what I wrote in the first statement, it referred to Wealthsimple Investments Inc. Which is covered by the exact same insurance as BMO InvestorLine and Scotia iTRADE which you referenced. To deny that is akin to denying 2+2=4. All of these companies are investment brokerage arms of their firms. Wealthsimple cash isn’t so the parallel with BMO InvestorLine does not apply.

With regards to CDIC coverage, forgive me for going with the primary source rather than with what someone asserted in a chatroom.

Does CDIC protect deposits in the event of fraud?
No. CDIC does not cover losses due to fraud.

https://www.cdic.ca/your-coverage/faqs/#information-q5

It is there in black and white. “Does not” stands for a negative in this context. Financial regulators provide protection against fraud. Wealthsimple Cash is subject to their supervision. Other HISA accounts are also subject to regulatory supervision for fraud prevention. As well as internal systems (of course).

April 6, 2024
5:01 pm
savemoresaveoften
Member
Members
Forum Posts: 2946
Member Since:
March 30, 2017
sp_UserOfflineSmall Offline

2 points are true 100%
1) WS is not a CDIC member
2) The cash act balance is held in trust with CDIC partners, which is not the same as the funds hold in the WS customers name at the CDIC partners. If it is, then each account is up to 100k including any balance the WS customer already has with the partner name.

It appears to be quite murky what is the coverage in the event of a WS failure. If the WS cash account funds are misused by WS, it’s not covered by CDIC as the partner bank is alive and well. I don’t think the partner bank is on the hook for WS’s misbehaviour. This leads to the ‘distribution and coverage according to bankruptcy proceeding and trust law’ That is very different from someone who believes if WS fails, CDIC will insure up to 100 or 500k whatever that number is.

If the cash is part of the WS investment account, then it’s covered by CIPF if WS fails. Cash sitting in WS investment acct earns a big 0% interest…

April 6, 2024
5:29 pm
mordko
Member
Members
Forum Posts: 889
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

CDIC has nothing to do with WS failing, yes. Because WS is not a member. The partner bank is not on the hook for WS misbehaviour. It is on the hook for the partner bank misbehaviour (CDIC isn’t).

Fraud is not covered by CDIC at member institutions either. If the fraud is extensive enough to bankrupt the institution only then CDIC will step in.

Financial institutions fail for all sorts of reasons, like liquidity problems, risk mismanagement, etc. If WS fails as a result of such an event then depositors are not impacted as their funds are with counterparty institutions. These deposits are placed in trust but belong to you, in the same way stocks belong to you even though they are not physically under your pillow.

In the event of fraud which does not bankrupt the institution, you are in the same boat as with CDIC members. No protection under CDIC. You are protected by the systems and regulators. And by institution’s financial strength. WS is not as large as the big 6 but it dwarfs credit unions.

The extra risk is in relation to fraud involving stealing of clients’ cash on a scale so large that it would bankrupt a 30bn corporation. Thats a pretty big failure of the institution. As well as financial regulators. Possible, of course, but rare. I am struggling to think of an example in recent memory, except for crypto operations in dodgy jurisdictions.

April 6, 2024
6:05 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 4257
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

Norman1 said
Both false.

Balance in Wealthsimple Cash account is with Weathsimple Payments Inc., not Wealthsimple Investments Inc.

Doesn't matter how a CDIC member fails. CDIC covers the insured account balance when member fails. Doesn't matter that CDIC won't cover balance lost when a member doesn't fail and funds were lost for some other reason.  

Actually, no. This is incorrect, Norman. I can see how you see that, as you like to refer only to legal documents on the company's website, and Wealthsimple Cash involves multiple entities and isn't all that transparent. However, what I've been able to determine is the Cash account is offered by Wealthsimple Investments, the companion card is from Wealthsimple Payments and issued by Koho Financial. With the Wealthsimple Cash account, Wealthsimple holds your deposits in pooled trust accounts with five unnamed CDIC member issuers, which can and sometimes do change frequently. That's how they offer CDIC insurance.

Cheers,
Doug

April 6, 2024
6:08 pm
savemoresaveoften
Member
Members
Forum Posts: 2946
Member Since:
March 30, 2017
sp_UserOfflineSmall Offline

The question is whether WS place 100% of all cash account deposit with partner banks 100% of the time, and if that is clearly spelt out in the WS cash account agreement. If it is, then it is indeed ‘similar’ to direct CDIC coverage I imagine,

April 6, 2024
6:40 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 4257
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

savemoresaveoften said
The question is whether WS place 100% of all cash account deposit with partner banks 100% of the time, and if that is clearly spelt out in the WS cash account agreement. If it is, then it is indeed ‘similar’ to direct CDIC coverage I imagine,  

I believe that it is, yes, with the possible exception of the funds needed to settle your Wealthsimple Cash Card transactions at the end of the day (since the funds sort of 'float' been card and account, which is held within one's Wealthsimple Trade account with Wealthsimple Investments).

That being said, I haven't opened an account as Tangerine and DYN6004 at Scotia iTRADE together with EQ Bank serve me just fine.

The lack of transparency by Wealthsimple does irk me, though. Is it a deal-breaker? No. Do I trust them? Yes, probably moreso than one of the Big 5 banks (*cough* TD Canada Trust *cough*) and one of the federal credit unions (*cough* Coast Capital Savings *cough*).

Cheers,
Doug

Disclosure: I own Great-West Lifeco, Inc. which has an equity investment in Wealthsimple alongside other Power Corporation-related entities, in my RRSP, and am a thoroughly pleased as punch common stockholder. I am also a disgruntled Coast Capital Savings Federal Credit Union member who plans to close his remaining accounts soon, and also a happy TD Bank shareholder but who would never be a TD customer.

April 6, 2024
6:48 pm
mordko
Member
Members
Forum Posts: 889
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

savemoresaveoften said
The question is whether WS place 100% of all cash account deposit with partner banks 100% of the time, and if that is clearly spelt out in the WS cash account agreement. If it is, then it is indeed ‘similar’ to direct CDIC coverage I imagine,  

Well, WS says so:

The balance in your Wealthsimple Cash account is held in trust for you with members of the Canada Deposit Insurance Corporation (CDIC), a federal Crown corporation.

I imagine it’s a fairly simple check in an audit. And by the regulator. I am not ruling out large scale fraud completely but (sadly) could happen anywhere. Won’t be keeping cash under the pillow regardless.

April 6, 2024
9:51 pm
Loonie
Member
Members
Forum Posts: 9308
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Which entity(ies) issue the T slips?

April 6, 2024
9:51 pm
Norman1
Member
Members
Forum Posts: 6910
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Doug said

Actually, no. This is incorrect, Norman. I can see how you see that, as you like to refer only to legal documents on the company's website, and Wealthsimple Cash involves multiple entities and isn't all that transparent. However, what I've been able to determine is the Cash account is offered by Wealthsimple Investments, …

Are you going explain how you determined that when both the Wealthsimple Cash user agreement and the Wealthsimple Cardholder agreement clearly say that the Wealthsimple Cash Account is with Wealthsimple Payment Inc., a money services business registered with FINTRAC?

April 6, 2024
10:53 pm
Norman1
Member
Members
Forum Posts: 6910
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

mordko said

… If you were to actually read what I wrote in the first statement, it referred to Wealthsimple Investments Inc. Which is covered by the exact same insurance as BMO InvestorLine and Scotia iTRADE which you referenced. To deny that is akin to denying 2+2=4. All of these companies are investment brokerage arms of their firms. Wealthsimple cash isn’t so the parallel with BMO InvestorLine does not apply.

So what? How is that relevant when the Wealthsimple Cash balance is owed by Wealthsimple Payments Inc. and not owed by Wealthsimple Investments Inc.?

With regards to CDIC coverage, forgive me for going with the primary source rather than with what someone asserted in a chatroom.

Does CDIC protect deposits in the event of fraud?
No. CDIC does not cover losses due to fraud.


It is there in black and white. “Does not” stands for a negative in this context. Financial regulators provide protection against fraud. Wealthsimple Cash is subject to their supervision. Other HISA accounts are also subject to regulatory supervision for fraud prevention. As well as internal systems (of course).

What are you saying? CDIC won't cover losses from a member failure caused by fraud? That would be nonsense. No deposit insurer has ever declined to cover the insured deposits when a financial institution failed, even when fraud caused the failure.

April 7, 2024
5:06 am
savemoresaveoften
Member
Members
Forum Posts: 2946
Member Since:
March 30, 2017
sp_UserOfflineSmall Offline

mordko said

Well, WS says so:

The balance in your Wealthsimple Cash account is held in trust for you with members of the Canada Deposit Insurance Corporation (CDIC), a federal Crown corporation.

I imagine it’s a fairly simple check in an audit. And by the regulator. I am not ruling out large scale fraud completely but (sadly) could happen anywhere. Won’t be keeping cash under the pillow regardless.  

Agree fraud and rogue traders can show up at any FI, not just WS.

dont know how trust works, does it mean WS actually setup each customer's deposit as separate trust account at the bank ? I guess this is the only way for each to be individually insured for 100k per partner name. When I am moving cash back and forth between the cash account and the trading account to put in limit order, they have to adjust my cash balance in the trust account daily ? Thats a lot of admin even if done automatically. From an operation perspective, it makes more sense for it to be a one big trust account WS facing the partner bank, but then the 100k per WS customer wont apply. Most likely WS just allow some slippage daily so its not 100% CDIC 100% of the time. Not saying I care but those who wont go ove $100k at big5 may.

CDIC will cover any CDIC member failure, the reason (fraud or plain stupidity) why it fails is not relevant to the eligibilty of coverage.

No permission to create posts

Please write your comments in the forum.