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CDIC protection for WS Cash accounts increased to 500K
April 7, 2024
5:15 am
Alexandre
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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,  

How about that: you give me your cash and I promise to keep it in my CDIC insured accounts with 1st tier banks. You can have your money back any time you request it from me, I swear.

If you believe such a deal is indeed similar to direct CDIC coverage, you should have no reservations trusting your cash to WS.

April 7, 2024
5:25 am
savemoresaveoften
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Alexandre said

How about that: you give me your cash and I promise to keep it in my CDIC insured accounts with 1st tier banks. You can have your money back any time you request it from me, I swear.

If you believe such a deal is indeed similar to direct CDIC coverage, you should have no reservations trusting your cash to WS.  

If your last name is Desmarais, it will be more "similar" to CDIC, unfortunately you are not 🙂

For the record, I use WS mainly as a commission free trading account, and already said WS cash account should not be used by others as a place to stuff $$$$$ of cash and use as a daily cash HISA.

April 7, 2024
5:30 am
mordko
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Norman1 said

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.  

1. It was you who brought up insurance for BMO InvestorLine and then stated that Wealthsimple Payments does not have it. Thats true but completely irrelevant to HISA accounts. Wealthsimple investments which provide the same type of service as BMO InvestorLine are covered by the exact same insurance.

2. CDIC does not cover losses due to fraud. Thats not me who is saying that. CDIC is saying that. CDIC covers losses due to failure. I am assuming if a hypothetical massive fraud caused a failure, CDIC would cover up to the insured limit. Most failures are not caused by fraud, its a red herring. Financial institutions in Canada are regulated to prevent this scenario. Perhaps you can give a specific example of CDIC covering losses due to bank failures caused by fraud.

April 7, 2024
6:15 am
mordko
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Alexandre said

How about that: you give me your cash and I promise to keep it in my CDIC insured accounts with 1st tier banks. You can have your money back any time you request it from me, I swear.

If you believe such a deal is indeed similar to direct CDIC coverage, you should have no reservations trusting your cash to WS.  

Where can I find your last year’s audit reports? Which financial regulator are you registered with? Is your promise a contract? How many billions are you worth?

April 7, 2024
7:33 am
RetirEd
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Doug: What's the source of your continued doubt about Coast Capital? I took a position on their temporary 6% promo this year.

RetirEd

April 7, 2024
8:53 am
Alexandre
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mordko said
Is your promise a contract?

Of course, it is. I will provide you with IOU, a Promissory Note to be exact. Promissory notes are governed by federal legislation.

In the improbable event that I will declare personal bankruptcy, your funds are to be recovered in accordance with Canadian personal bankruptcy laws and proceedings.

Once again, if you see no concerns with that, you should have no concerns about WS.

April 7, 2024
9:06 am
mordko
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Alexandre said

mordko said
Is your promise a contract?

Of course, it is. I will provide you with IOU, a Promissory Note to be exact. Promissory notes are governed by federal legislation.

In the improbable event that I will declare personal bankruptcy, your funds are to be recovered in accordance with Canadian personal bankruptcy laws and proceedings.

Once again, if you see no concerns with that, you should have no concerns about WS.  

You answered one question out of four. Which suggests you understand that your hypothetical scenario is also irrelevant to the topic.

April 7, 2024
1:59 pm
Alexandre
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mordko said
You answered one question out of four. Which suggests you understand that your hypothetical scenario is also irrelevant to the topic.  

I understand that I will not trust my money to neither person not corporation under my hypothetical scenario. You apparently don't. It is your money, I am not telling you how lose use it.

April 7, 2024
2:05 pm
mordko
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Alexandre said

I understand that I will not trust my money to neither person not corporation under my hypothetical scenario. You apparently don't. It is your money, I am not telling you how lose use it.  

Quite. You keep your cash safe under pillow and I will “lose” mine with a regulated and financially sound corp of my choosing based on the benefits a particular product offers me. Consensus.

April 7, 2024
2:17 pm
mordko
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In general, fraud can happen anywhere and CdIC specifically excludes fraud from coverage but large scale fraud in regulated jurisdictions is also rare. The type of fraud Alexandre is talking about would be too dumb because the first audit would expose a problem.

Banks tend to fail because of
a) lack of liquidity with clients pulling money faster than assets can be cashed or
b) misjudging risk of complex financial products.

WS cash account isn’t exposed to either of these two scenarios and if the counterparty fails then CDIC will step in. So yes, I am comfortable with WS, much more so than with small CUs under provincial coverage and regulatory system. And I still use them, while taking care to keep everything diversified between assets and jurisdictions.

April 7, 2024
2:32 pm
Alexandre
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mordko said

You keep your cash safe under pillow and I will “lose” mine with a regulated and financially sound corp of my choosing based on the benefits a particular product offers me. Consensus.  

I do have strong opinions about current financial markets, that is correct, but this is not the topic of this forum topic.

This forum topic is about an intermediary that promised to hold up to $500,000 of your cash in CIDC insured tier 1 FIs and implies this will be as safe as if you would have done it yourself by opening accounts with said FIs in your name.

Also, I am not talking about fraud at all, you must have misread what I said. I am saying that in the case of said intermediary going out of business (which is not necessarily result of a fraud, mind you) they will hold your funds and your guarantee will be not CDIC but bankruptcy laws.

I can tell that you are fine with that. I am not.

By the way, I'll have to decline your recommendation to "keep my cash safe under pillow."
I checked with CDIC and "under the pillow" is not CDIC insured. I checked with police web site and they don't treat "under the pillow" as a safe place to keep banknotes.

April 7, 2024
3:23 pm
kesa
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why the fuss?

you all have so much money that you need to diversify to WS?
sf-laugh

April 7, 2024
4:25 pm
mordko
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Alexandre said

Also, I am not talking about fraud at all, you must have misread what I said. I am saying that in the case of said intermediary going out of business (which is not necessarily result of a fraud, mind you) they will hold your funds and your guarantee will be not CDIC but bankruptcy laws.

I understand that you are suggesting that WS will take my money and put them somewhere else rather than in a CDIC insured account with a federally regulated bank. Contrary to what they say in T&Cs. That would be very similar to the type of SBF behaviour. He was convicted of fraud. Of course he was trading crypto, it was quite a bit more complicated than putting CAD in a bank account and he deliberately picked Nassau for his corp to be far away from the regulators.

People who invest in stocks routinely put trust in intermediaries who have custody of their investments in third parties and hypothetically “might” go bankrupt. Its not an especially scary scenario. Its not a risky business to start with.

I am also rooting for WS as an innovative fintech to grow and to provide some meaningful and desperately needed competition to our banking oligopoly.

Anyway, I am far more comfortable with WS/Power Corp than with DUCA, which also has my money right now. Not for long.

April 9, 2024
12:15 pm
pwr1019
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mordko said

Anyway, I am far more comfortable with WS/Power Corp than with DUCA, which also has my money right now. Not for long.  

+1 absolutely agree with that

April 9, 2024
4:24 pm
Loonie
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I have put as much as I want into DUCA, now at 6%. There have been a few small bumps along the road, but DUCA has given me a superior savings rate for a while now. It's been significantly higher than WS's all along, and with no uncertainty about insurance. At WS, you don't even know which FI your money is in, and I find this lack of transparency unacceptable.
Yes, the DUCA rate can change - and so can WS's.
I would not recommend DUCA for people who don't live convenient to a branch due to online limits.

Each to their own.

April 9, 2024
10:56 pm
Norman1
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mordko said

1. It was you who brought up insurance for BMO InvestorLine and then stated that Wealthsimple Payments does not have it. Thats true but completely irrelevant to HISA accounts. Wealthsimple investments which provide the same type of service as BMO InvestorLine are covered by the exact same insurance.

No, Wealthsimple Investments does not. As I said before, one's Wealtsimple Cash Account balance is with Wealthsimple Payments and not with Wealthsimple Investments. There's no CDIC coverage or CIPF coverage.

2. CDIC does not cover losses due to fraud. Thats not me who is saying that. CDIC is saying that. CDIC covers losses due to failure. I am assuming if a hypothetical massive fraud caused a failure, CDIC would cover up to the insured limit. Most failures are not caused by fraud, its a red herring. Financial institutions in Canada are regulated to prevent this scenario. Perhaps you can give a specific example of CDIC covering losses due to bank failures caused by fraud.

Financial institutions are regulated so that they don't fail frequently. They are not regulated to prevent failures. If they were so regulated, then there would no need for CDIC or any other deposit insurer. Lending is a risky business. Bank and trust companies are not limited to insured mortgages or government-backed loans.

Former CDIC member Principal Savings & Trust that failed around 1987 is one example. It was a member of a group of companies, the Principal Group of Companies, that failed as the result of fraudulent accounting and related company transactions which synthesized accounting earnings when there were no actual earnings.

April 9, 2024
11:18 pm
Norman1
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More examples of CDIC covering failures resulting from fraud are former CDIC members Greymac Mortgage, Seaway Mortgage, and Crown Trust.

From The Christian Science Monitor (July 10, 1987): Canada real estate scam toppled:

The crown attorney (district attorney), Murray Segal, told a Toronto court that [the accused Bill] Player used a technique known as an ``Oklahoma.'' He gave a hypothetical example. Player would buy a property for $1 million and sell it to a friend or relative for $5 million. Then, Player would raise a 75 percent mortgage on the phony $5 million. Player would then pay off the $1 million purchase price, give the accomplice a small tip, and afterward pocket about $3.7 million on the deal.

``His financial empire grew and grew until it went out of control,'' said Mr. Segal. ``There was a pervasive pattern of criminal activity.''

At the time, the Ontario government seized the assets of three trust companies involved - Crown Trust, Seaway Trust, and Greymac Trust. It was an unprecedented move. Trust companies specialize in mortgage loans, much like the American equivalent of a savings and loan. The control of these trust companies and their illicit use made the huge fraud possible.

The Canadian Deposit Insurance Corporation, the equivalent of the Federal Deposit Insurance Corporation in the United States, had to pay almost C$400 million in public funds to cover defrauded depositors in the trust firms involved.

April 10, 2024
4:15 am
mordko
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Norman1 said

mordko said

1. It was you who brought up insurance for BMO InvestorLine and then stated that Wealthsimple Payments does not have it. Thats true but completely irrelevant to HISA accounts. Wealthsimple investments which provide the same type of service as BMO InvestorLine are covered by the exact same insurance.

No, Wealthsimple Investments does not. As I said before, one's Wealtsimple Cash Account balance is with Wealthsimple Payments and not with Wealthsimple Investments. There's no CDIC coverage or CIPF coverage.

Investments in BMO InvestorLine are covered by CIPF rather than CDIC. Investments in WS are covered by the EXACT same CIPF. You can put Wealthsimple Investments Inc. into the search field and it comes up https://www.cipf.ca/member-directory/current-cipf-members, just as BMO InvestorLine Inc.

Wealthsimple Payments is not a platform for investments, so reference to BMO Investorline isn’t relevant but if we are going to talk about investment platforms then there is no difference in coverage.

April 10, 2024
4:47 am
davidgeorge
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I don't understand why people want to put funds on WS savings if you don't use WS as a stock trading platform. There are much higher interest savings account around such as DUCA (6%), Tangerine (5.5%, 5.25%), ManuLife 5.75%.

April 10, 2024
4:49 am
mordko
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Norman1 said
More examples of CDIC covering failures resulting from fraud are former CDIC members Greymac Mortgage, Seaway Mortgage, and Crown Trust.

From The Christian Science Monitor (July 10, 1987): Canada real estate scam toppled:

The crown attorney (district attorney), Murray Segal, told a Toronto court that [the accused Bill] Player used a technique known as an ``Oklahoma.'' He gave a hypothetical example. Player would buy a property for $1 million and sell it to a friend or relative for $5 million. Then, Player would raise a 75 percent mortgage on the phony $5 million. Player would then pay off the $1 million purchase price, give the accomplice a small tip, and afterward pocket about $3.7 million on the deal.

``His financial empire grew and grew until it went out of control,'' said Mr. Segal. ``There was a pervasive pattern of criminal activity.''

At the time, the Ontario government seized the assets of three trust companies involved - Crown Trust, Seaway Trust, and Greymac Trust. It was an unprecedented move. Trust companies specialize in mortgage loans, much like the American equivalent of a savings and loan. The control of these trust companies and their illicit use made the huge fraud possible.

The Canadian Deposit Insurance Corporation, the equivalent of the Federal Deposit Insurance Corporation in the United States, had to pay almost C$400 million in public funds to cover defrauded depositors in the trust firms involved.

  

Thanks. Interesting. I am comfortable that this has nothing to do with the business of an intermediary who is taking money from clients and putting them in CDIC insured banks. I am also comfortable that matching assets and liabilities for WS Cash is a sufficiently straightforward job even auditors and regulators can be trusted with.

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