How your investments are protected at financial institutions

When you deposit money in a bank, credit unionCredit union A non-profit financial institution whose members own and operate it. Members can borrow money at low interest rates and make deposits. Sometimes large organizations set them up for their members or employees. Offer services similar to a bank such as chequing and savings accounts.+ read full definition or other financial institution, you want to know your money is safe. Canada has a well-regulated financial services sectorSector A part of the economy where businesses provide the same or related products or services. May also refer to a group.+ read full definition. 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.

On this page we answer

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)Canada Deposit Insurance Corporation (CDIC) A crown agency that protects the Canadian dollars that you deposit with banks and trust companies. If the bank or trust company goes out of business, CDIC can reimburse you for eligible deposits, up to a set limit.+ read full definition 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:

  • Banks
  • 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
  • cryptocurrencies

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 dealerInvestment dealer A securities firm that buys and sells a wide range of investments. They are likely a member of the Investment Industry Regulatory Organization of Canada (IIROC).+ read full definition and mutual fund dealerMutual fund dealer A company that buys and sells the shares or units of mutual funds for investors.+ read full definition 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)Investment Industry Regulatory Organization of Canada (IIROC) National self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.+ read full definition and the Mutual Fund Dealers Association of Canada (MFDA). It oversees all investment dealers, mutual fund dealers and trading activity on Canada’s debtDebt Money that you have borrowed. You must repay the loan, with interest, by a set date.+ read full definition and equityEquity Two meanings: 1. The part of investment you have paid for in cash. Example: you may have equity in a home or a business. 2. Investments in the stock market. Example: equity mutual funds.+ read full definition 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:

  • cash
  • securities
  • futuresFutures A derivative contract that commits you to buy or sell a commodity, currency or stock market index at a set price on a set date in the future. Unlike an option, you can’t change your mind later; you must do what your contract says you will do.+ read full definition
  • 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 certificateShare certificate A document that represents a shareholder’s part ownership of a company+ read full definition 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, marginMargin A way to buy investments by borrowing money from a stockbroker. You must also invest some of your own money first. The extra that you borrow is your margin. Some rules apply about the size of margin that you can have.+ read full definition 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.

For information about other compensation plans in Canada, visit The Canadian Financial Services Consumer Protection website.

Learn how regulators protect investors.

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.

If you believe you lost money due to poor advice, you can make a complaint. Read how to make a complaint.

Summary

In the rare chance a problem arises with your financial institution in Canada, you can turn to:

  • Canada Deposit Insurance Corporation (CDIC) — a federal Crown corporation. It provides deposit insurance against the loss of eligible deposits at member institutions in the event of failure.
  • 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.

You may also like…

Last updated