The Canada Deposit Insurance Corporation (CDIC) insures your bank deposits, but how are your investments covered? While you’re never fully shielded from the risk of investment losses, the Canadian Investor Protection Fund (CIPF) protects the money in your investment accounts.
CIPF coverage gives both seasoned and beginner investors peace of mind that if the institution holding their investments fails, and investors’ assets are missing or at risk, the CIPF will step in to provide financial protection up to a certain amount.
Who is the CIPF?
The CIPF is a not-for-profit organization that follows a mandate established by Canada’s provincial and territorial securities regulators. It is sponsored by members of the Investment Industry Regulatory Organization of Canada (IIROC), the self-regulatory organization for firms registered as investment dealers in Canada.
CIPF provides coverage to eligible clients, ensuring that the securities, cash or other assets they hold with an investment dealer are protected if the dealer becomes insolvent and fails to return their property.
CIPF coverage is automatically applied when you open your account with a member firm, doesn’t cost an investor anything, and doesn’t depend on an investor’s residency or citizenship. More than 170 investment dealers are members of the CIPF. A directory of CIPF member firms is available online.
CIPF coverage rules
CIPF coverage extends to cash balances, securities, commodities, futures contracts and segregated insurance funds held in accounts with an IIROC member firm that are not returned to you after that firm becomes insolvent.
CIFP’s objective is to return the property to the client, but the fund makes it clear that it doesn’t guarantee the value of an investment.
For example, say you’ve decided to invest in stocks and purchased 100 shares of Company XYZ for $100 two years ago, but the stock was worth $75 per share on the day your broker became insolvent. The CIFP would aim to return the 100 shares to you — and it would compensate you at $75 per share, based on their value on the date of insolvency.
Limits on CIPF protection for individuals:
- $1 million combined for general accounts, such as tax-free savings accounts (TFSAs) and margin accounts, plus
- $1 million combined for registered retirement accounts such as registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs), plus
- $1 million for all registered education savings plans (RESPs) combined, for clients who are subscribers.
Corporations, partnerships, unincorporated organizations and trusts are subject to slightly different limitations, but it is typically $1 million for all accounts combined.
While the CIPF will cover investor losses in cases where an investment firm becomes insolvent, it’s also important to be aware of the things CIPF won’t reimburse.
For example, CIPF coverage does not apply to
- Losses from unsuitable investments or poor advice
- Changes in the market value of your stocks
- Misrepresentations made to a client by an advisor
- Insolvency of the underlying company that issued the security
- Securities you hold yourself — only those held for you by a member institution.
- Directors/general partners of the member firm, anyone who contributed to the firm’s insolvency, or some shareholders or limited partners of the member firm
- Other IIROC member firms or firms registered with a securities regulator
CIPF vs. CDIC: What is and isn’t covered
Both the CIPF and the Canada Deposit Insurance Corporation (CDIC) offer financial protection for individuals in the event of financial institution insolvency, but the two types of coverage are unrelated.
The CIFP is designed to protect the property within an investment account held by IIROC member firms if the investment dealer becomes insolvent.
|Canadian Investor Protection Fund (CIPF)||Canada Deposit Insurance Corporation (CDIC)|
|Coverage amount||Up to $1 million per separately insured account, which includes general investment accounts, registered retirement accounts, and registered education savings plans (RESPs).||Up to $100,000 per separately insured category, such as single bank accounts, joint accounts, RRSPs, and more.|
|What is covered||Property held in accounts with an insolvent CIPF member, such as |
Cash balances, like those in a high-interest TFSA
Segregated insurance funds
Guaranteed investment certificates (GICs) and other eligible term deposits
Money orders and bank drafts
Foreign currency (eg. $U.S.)
|What isn't covered||Investment losses|
Securities held directly by you
Securities or segregated funds that are not held by a member firm
Stocks and bonds
Exchange traded funds (ETFs)
|Who is eligible for coverage||Anyone who has an account with a CIPF member firm that is used solely for investing in securities or in futures contracts. Non-residents and non-citizens are eligible.||Anyone who has an eligible deposit with a CDIC member institution. Non-residents and non-citizens are eligible.|
|How to obtain coverage||Coverage is free and automatically provided to anyone who has an investment account with a CIPF member firm.||Coverage is free and automatically provided to anyone who has a deposit account with a CDIC member institution.|
Frequently asked questions
How are investments insured?
In the event that the broker, robo-advisor, investment dealer or financial institution fails and your assets are at risk, your investment property is protected if the investment dealer is a CIPF member.