Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.
What’s the CIPF?
For many new investors deciding to place their money in an investment account, a big question on their mind is: “Is my investment safe?” While investing carries a certain amount of risk with it, your account at an investment dealer is protected by something called the Canadian Investor Protection Fund (CIPF).
What is CIPF?
CIPF protects you, an investor, if the investment dealer you’ve been keeping your money and/or investments with goes insolvent. If an investment dealer that is a member of CIPF goes insolvent and cannot return the cash and/or securities in your account to you, your cash and/or securities may be eligible for coverage up to specified limits. That’s why it’s always important to make sure the investment dealer you’re using is a member of CIPF.
It’s important to note that to be eligible for CIPF coverage, the financial loss must be caused by the insolvency of your investment dealer. It doesn’t cover things like losses in the stock market. CIPF doesn’t protect against the risk inherent to investing. CIPF also doesn’t protect you if you’ve been defrauded by a third party or somehow manipulated.
So let’s say you have stocks valued at $20,000 in an investment account you opened with investment dealer XYZ. If XYZ is a CIPF member and suddenly goes insolvent, your stocks valued at $20,000 at the time of insolvency would be covered, since CIPF covers up to $1 million in your account. However, if you’ve lost your $20,000 because you decided to buy 4,000 shares of a new company selling zero-calorie water (which surprisingly wasn’t a massive success), then there’s nothing CIPF can do about that.
What are the benefits of CIPF?
What are the benefits? You don’t have to sign up for CIPF coverage. If your investment dealer is a member of CIPF, you, Joe Investor, will automatically become eligible for coverage (subject to some limits) when you open an account. Non-residents and non-citizens of Canada are eligible for coverage.
Is there anything to be careful about?
Always double-check with CIPF to make sure that the investment company is actually a member. Also keep in mind that the cash and/or securities in your account are only protected up to CIPF coverage limits ($1 million for all general accounts combined, $1 million for all registered retirement accounts combined, and $1 million for all RESP accounts combined); anything above that won’t be covered by CIPF in case of (unlikely) disaster.
If you want to make sure that the investment dealer where you want to open an investment account is a member of CIPF, you should contact your investment advisor or representative, call CIPF at (416) 866-8366 or toll free at 1 (888) 243-6981, or visit the CIPF website.
In the unlikely event that an investment dealer becomes insolvent (it’s only happened 21 times in Canada since 1969) and CIPF gets involved, accounts will be frozen and it may take some time to access your cash and/or securities again.
Want to Learn More About CIPF?
You can check out the CIPF Investor Series, which contains educational resources developed for investors.
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