Originally published by the Ontario Securities Commission on GetSmarterAboutMoney.ca
When you deposit money in a bank, credit union or other financial institution, you want to know your money is safe. Canada has a well-regulated financial services sector. In the rare occurrence that your financial institution fails, there are protections in place to help you. Find out about more the protections in Canada.
Which organizations protect your investments in financial institutions?
In Canada, there are two main organizations who help protect your investments at financial institutions. It’s important for you to have confidence to know your money will be there when you want to withdraw it. In the rare chance a problem arises, you can turn to:
- Canada Deposit Insurance Corporation
- Canadian Investor Protection Fund
What is the Canada Deposit Insurance Corporation?
Canada Deposit Insurance Corporation (CDIC) is a federal Crown corporation. It provides deposit insurance against the loss of eligible deposits at member institutions in the event of failure.
CDIC member institutions include:
- Federally regulated credit unions
- Loans and Trust companies
- Associations governed by the Cooperative Credit Associations Act that take deposits
What is covered?
- savings and chequing accounts
- GICs and other eligible term deposits
What is not covered?
- mutual funds, stocks and bonds
- foreign currency
What are CDIC’s coverage limits?
If a CDIC member institution fails, eligible deposits at each CDIC member institution are protected to a maximum of $100,000 per separately insured category.
Do you have pay or apply for CDIC coverage?
No. CDIC coverage is free and automatic. If your deposits are insured, CDIC will pay you automatically in case of a failure.
Learn more about how deposit insurance works.
What is the Canadian Investor Protection Fund?
The Canadian Investor Protection Fund (CIPF) is a not-for-profit organization. Its mandate is to provide protection to customers of investment dealer and mutual fund dealer firms that are members of the Canadian Investment Regulatory Organization (CIRO). CIPF can return assets to you or compensate you when your assets are not available because a member firm has become insolvent.
Who are CIPF member firms?
Membership of CIPF includes investment dealers and mutual fund dealers who are members of the Canadian Investment Regulatory Organizations (CIRO). (CIRO was formerly known as the New Self-Regulatory Organization of Canada or New SRO.)
CIRO consolidates the operations of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA). It oversees all investment dealers, mutual fund dealers and trading activity on Canada’s debt and equity marketplaces.
Prior to the amalgamation of IIROC and the MFDA, the former CIPF and the MFDA IPC were the investor protection funds for members of IIROC and the MFDA, respectively. The former CIPF and the MFDA IPC amalgamated to form CIPF.
What does CIPF cover?
CIPF covers missing property. This is property held by a CIPF member firm on your behalf that is not returned to you following the firm’s insolvency. Missing property can include:
- segregated insurance funds
What does CIPF not cover?
CIPF does not cover losses resulting from:
- a drop in the value of your investments for any reason.
- unsuitable investments.
- fraudulent or other misrepresentations that were made to you.
- misleading information that was given to you.
- important information that was not disclosed to you.
- poor investment advice.
- the insolvency or default of the company that issued your security.
- securities held directly by you (for example, a share certificate that you hold).
Read more about other exclusions in the CIPF Coverage Policy.
What are CIPF’s coverage limits?
For an individual, the limits on CIPF protection are generally as follows:
- $1 million for all general accounts combined (such as cash accounts, margin accounts and TFSAs), plus
- $1 million for all registered retirement accounts combined (such as RRSPs, RRIFs and LIFs), plus
- $1 million for all registered education savings plans (RESPs) combined where the client is the subscriber of the plan.
Do you have to pay or apply for CIPF coverage?
No. You do not have to pay for CIPF coverage. It is free and automatic if you have an account with a CIRO member firm that is used solely for investing in securities or in futures contracts.
See the differences between CIPF and CDIC.
How is Canada different than the U.S. when it comes to investor protection at financial institutions?
When a bank fails in the United States, investors in Canada may get nervous. Canada operates very differently than the United States when it comes to investor protection.
Canada has a strong regulatory system and protections for investors. Historically, Canada has a solid track record of investor protection.
In Canada, most bank deposits are insured by the Canada Deposit Insurance Corporation (CDIC). If a CDIC member institution fails, eligible deposits are protected to a maximum of $100,000 at each member institution for each category.
The Canadian Investor Protection Fund (CIPF) also provides investor protection. It can return assets to you or compensate you when your assets are not available because a CIRO member firm has become insolvent.
The U.S. banking system is more competitive, and banks take more risks in that environment. Since 2001, hundreds of U.S. banks have failed, but not one Canadian bank during that same time frame.
Learn more about oversight of Canada’s financial system.
“GetSmarterAboutMoney.ca is an Ontario Securities Commission (OSC) website that provides unbiased and independent financial tools to help you make better financial decisions.”
The Ontario Securities Commission
The Ontario Securities Commission (OSC) is an independent Crown corporation that is responsible for regulating the capital markets in Ontario. Our statutory mandate is:
To provide protection to investors from unfair, improper or fraudulent practices, to foster fair, efficient and competitive capital markets and confidence in the capital markets, to foster capital formation, and to contribute to the stability of the financial system and the reduction of systemic risk.
Providing protection to investors is a key part of the OSC’s mandate. As a regulatory agency, the OSC administers and enforces the Securities Act (Ontario) and the Commodity Futures Act (Ontario). Specifically, the OSC works to protect investors by making and enforcing rules governing the securities industry in Ontario.