# CDIC insurance.



## Taraz

So, if investment products (stocks, GIC's longer than 5 years, bonds, etc.) are not covered by CDIC, does that mean that a bank could seize them to pay off any debts in case of bankruptcy? (Or is that not an issue because they are actually in the stock owner's name, not the bank's name?)


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## wendi1

Different issue.

CDIC does not protect you from having your GICs seized by a bankrupcy court. It protects you if the bank itself fails.

The bank's creditors would not grab your assets, in any case, because they are "segregated" - meaning that they belong to you, not the bank.


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## Taraz

Wouldn't a bank failure be essentially the same as a bank going bankrupt?

If not, what exactly would a "bank failure" be? If the bank isn't bankrupt, presumably you could sue them if they seized your accounts. In that case, I'm not really sure what the point of the CDIC is.


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## wendi1

Ah. I misunderstood. I thought you were talking about your personal GICs being protected by your personal bankrupcy.

Bank failures are not common anymore, but they used to be. My grandmother, for instance, remembered bank failures that occurred during the depression. They would just close up, and all your deposits were gone. As a result, her generation was more inclined to put money in mattresses.

My discount broker holds my GICs as "segregated" and cannot use the money for its own uses, but if the bank that issued the GIC failed, I would be SOL except for CDIC.


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## Taraz

Basically, I was wondering if investments are at risk if a bank fails. (For example, would I have a problem with my stocks if QuestTrade failed.)


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## wendi1

Different question again. Questrade is not a bank, it is a discount broker.

You might have a temporary problem buying or selling your investments. But your stocks belong to you, not to Questrade, and are segregated.


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## andrewf

A valid concern is any cash you kept in accounts at questrade. I believe that would be at risk in the event the brokerage failed. This is part of the reason why investors typically park cash in money market funds, even for short periods of time.


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## OptsyEagle

Taraz said:


> Basically, I was wondering if investments are at risk if a bank fails. (For example, would I have a problem with my stocks if QuestTrade failed.)


As long as the stocks were worth less then $1 million you should be alright. It is the Canadian Investor Protection Fund (CIPF) that protects you with brokerage accounts, not CDIC.


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## Taraz

Unfortunately, still far less than $1 million. :-(

Thanks for the explanation, that makes sense!


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## james4beach

Taraz said:


> So, if investment products (stocks, GIC's longer than 5 years, bonds, etc.) are not covered by CDIC, does that mean that a bank could seize them to pay off any debts in case of bankruptcy? (Or is that not an issue because they are actually in the stock owner's name, not the bank's name?)


Banks don't "seize" any of these things. You have to start thinking in terms of liability, or monies owed. The cash you see in your Questrade account doesn't exist, there is nothing to "seize". it's a promise.

When you deposit money in a bank, or when you have cash in a brokerage "balance" that amount is really an amount that the brokerage owes you. The brokerage has a liability, they owe you money.

If you read your brokerage agreements carefully you'll see that they indicate that any excess cash balances are amounts that the business may use at their own whim. You just get a promise from them that they will REPAY you.

So the only question here is one of promises. Will the brokerage make good on their promise to repay you the cash?

Any amount that's uninsured, is at risk of not being repaid to you as owed. The exact same thing would happen if you lend me money. Maybe you'll get your money back, maybe you won't!

If Questrade fails, the biggest danger is that they won't repay you the cash amounts in your account (any credit cash balances). You could then seek recourse via CIPF, which is not a government insurance fund. Like any other private insurer, CIPF will drag their feet, and will try to not pay out money in an insurance claim.

CDIC is different in that their mandate is to preserve faith in the Canadian banking system. CDIC will pay you out. CIPF will (eventually) pay you too, but you may have to sue them first. Like any insurer.

My advice: don't leave credit cash balances at brokerages.

Money in the form of stocks is a bit safer, because (provided the brokerage isn't engaged in fraud), you do have shares. In that case, it doesn't matter if the brokerage fails. Your shares are simply transferred to another brokerage.

Except in case of fraud, where the brokerage fails to actually have your shares.

But I would say the bigger risk is for CASH balances at brokerage. Try to hold little or no cash at brokerages. Instead, put cash into CDIC insured bank accounts.


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## james4beach

By the way, the shares are not in your name. They are in the name of the brokerage.

You have to trust that the brokerage isn't engaged in fraud, and is actually keeping proper records that those are your shares.

(Personally I don't trust brokerages very much, and if you want to know why, start googling for Refco, MF Global, Opes Prime, etc)


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## humble_pie

james4beach said:


> By the way, the shares are not in your name. They are in the name of the brokerage.
> 
> You have to trust that the brokerage isn't engaged in fraud, and is actually keeping proper records that those are your shares.
> 
> (Personally I don't trust brokerages very much, and if you want to know why, start googling for Refco, MF Global, Opes Prime, etc)



oh dear. We are cycling towards fear-mongering again. Just when i thought you were getting it under control james4 each:


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## Rusty O'Toole

Thats right. Unless you have registered your shares with the issuing company, they are held by your broker in street name, meaning in the name of the brokerage. If the brokerage goes bankrupt, you do not own the shares. You are a creditor of the company and can get in line behind everyone else, and maybe see a few pennies on the dollar some time in the next 10 years.


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## Taraz

Rusty O'Toole said:


> Thats right. Unless you have registered your shares with the issuing company, they are held by your broker in street name, meaning in the name of the brokerage. If the brokerage goes bankrupt, you do not own the shares. You are a creditor of the company and can get in line behind everyone else, and maybe see a few pennies on the dollar some time in the next 10 years.


Ah, that actually explains a lot. (And scares me a bit.) Time to direct-purchase and set up a DRIP, I guess.

Thanks for the info!


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## fatcat

james4beach said:


> CIPF will (eventually) pay you too, but you may have to sue them first. Like any insurer.


it's also important to remember that the next time you have a hamburger they might forget to put the onions on ...

remember we live in a universe that might have as many as 10 dimensions and who knows how many universes, just about _anything_ can (and does) happen

i do suspect that in the event of a brokerage failure, the powers that be will be whispering in the ear of the CIPF saying "get the deposits back in the hands of investors as quickly as possible"

_nobody_ would benefit, _especially_ other brokers, banks and the whatever government was sitting at the time, from seeing a brokerage collapse and a boiling pot of anger and fear from investors, which would inevitably infect the whole investment sector in canada 

i suspect that power would be exerted on all sides to make people whole as quickly as possible

use common sense, back up files and keep good records

and always lift your bun and take a look around before biting into your hamburger


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## humble_pie

Rusty O'Toole said:


> If the brokerage goes bankrupt, you do not own the shares. You are a creditor of the company and can get in line behind everyone else, and maybe see a few pennies on the dollar some time in the next 10 years.



my last hamburger bun had a fortune cookie in it - ok it was a MCD bun - the cookie said Don't believe flakey pastries that talk about creditors getting in line; clients of a failed broker would be served differently from ranking creditors.

in a best case scenario, a collapse would be an isolated case involving one broker-dealer that had gotten itself into trouble.

efforts will always be made to get this company sold as a going concern to another brokerage. Some posters have posted - another thread - that a broker failure doesn't mean beans, it simply means that a client's shares will be transferred to another broker. Such a statement is also misleading imho.

*if* another broker can be found to buy a failing company, then the shares will be transferred almost seamlessly. But *if* no deux ex machine buying broker appears, then a difficult situation will ensue. The CIPF will become involved, a serious effort will be made to sort out who owns what & what exactly the CIPF will pay for. Margin positions, for example, have to be unravelled. Many clients will end up not owning the stock that they had purchased on margin or loan. Such stock will have collapsed in value, let us not forget.

this inventorying process could easily take a year or longer. During this period of time, my understanding is that accounts would be frozen. Former clients would not be allowed to sell the shares that they had, in fact, previously owned in good faith. Just in itself, this misfortune could cause great hardship.

in the event of a global financial collapse, the situation would be unspeakably worse. Surviving brokerages would not be able to pay any CIPF special assessments. There would not, in fact, be any CIPF, since it is not a monetized fund but rather an assembly of rights to make special assessments upon the broker community in the case of an isolated failure here or there.

global financial collapse would mean pandemonium. Chaos like nothing we've ever seen. All the sweet whisperings won't be heard, the fortune cookies in hamburger buns won't be found. Because there won't be any hamburger buns.

the world came close to this in 2008/09. How quickly people forget.


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## fatcat

humble_pie said:


> my last hamburger bun had a fortune cookie in it - ok it was a MCD bun - the cookie said Don't believe flakey pastries that talk about creditors getting in line; clients of a failed broker would be served differently from ranking creditors.
> 
> in a best case scenario, a collapse would be an isolated case involving one broker-dealer that had gotten itself into trouble.
> 
> efforts will always be made to get this company sold as a going concern to another brokerage. Some posters have posted - another thread - that a broker failure doesn't mean beans, it simply means that a client's shares will be transferred to another broker. Such a statement is also misleading imho.
> 
> *if* another broker can be found to buy a failing company, then the shares will be transferred almost seamlessly. But *if* no deux ex machine buying broker appears, then a difficult situation will ensue. The CIPF will become involved, a serious effort will be made to sort out who owns what & what exactly the CIPF will pay for. Margin positions, for example, have to be unravelled. Many clients will end up not owning the stock that they had purchased on margin or loan. Such stock will have collapsed in value, let us not forget.
> 
> this inventorying process could easily take a year or longer. During this period of time, my understanding is that accounts would be frozen. Former clients would not be allowed to sell the shares that they had, in fact, previously owned in good faith. Just in itself, this misfortune could cause great hardship.
> 
> in the event of a global financial collapse, the situation would be unspeakably worse. Surviving brokerages would not be able to pay any CIPF special assessments. There would not, in fact, be any CIPF, since it is not a monetized fund but rather an assembly of rights to make special assessments upon the broker community in the case of an isolated failure here or there.
> 
> global financial collapse would mean pandemonium. Chaos like nothing we've ever seen. All the sweet whisperings won't be heard, the fortune cookies in hamburger buns won't be found. Because there won't be any hamburger buns.
> 
> the world came close to this in 2008/09. How quickly people forget.


well yes, my comments are based on a "one off" scenario where a small broker goes bust ... in the case of a larger systemic collapse then yes, all bets would be off, pandemonium _would_ be the word of the day and this is a good reminder of why it is always a good idea to have multiple sources of assets and cash

i do think that in any case involving a one off non-big 5 brokerage there would be intense pressure exerted to make people whole as quickly as possible because the ensuing paranoia from a brokerage collapse would quickly infect the entire investing infrastructure which would make none of the major players happy as they (and the government especially) seek to soothe the small investor at all times 

the question of the collapse of the _backstop of the backstoppers_ (the CIPF and the government i.e.) is another matter entirely and i am too old to know or care what that would involve


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## Eclectic12

humble_pie said:


> ... in a best case scenario, a collapse would be an isolated case involving one broker-dealer that had gotten itself into trouble.
> 
> efforts will always be made to get this company sold as a going concern to another brokerage ...
> *if* another broker can be found to buy a failing company, then the shares will be transferred almost seamlessly ...


I doubt anyone would buy it just to resurrect it ... and I have no idea why you think the buyers would look to keep it a going concern. 


I expect it would be the same as when Confed Life failed and the other insurance companies bid on/bought the different parts of the business they were interested in. Once bought, the data was integrated into the existing systems and letters went out telling of the change and how to get what was needed done.

The main challenge I see is that the buying broker is going to have to somehow get the customer setup on their systems/accounts. Getting the books loaded into the computers will take a bit of effort but shouldn't take forever.


If it's an industry wide collapse, then it's messy.


Cheers


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## gibor365

Now ING reduced interest rate from 2% to 1.5% and I'm moving significant amounts of money into Peoples Trust who still pays 1.8%.
I reviewed again CDIC website and want to make sure if I understand correctly. If we have :
1. CASH account in my name: 80K HISA + 20K in different GICs (less than 5 years)
2. CASH account in wife name: 80K HISA + 20K in different GICs (less than 5 years)
3. CASH account Joint for me and my wife: 80K HISA + 20K in different GICs (less than 5 years)
4. CASH account Joint for my son and my wife: 80K HISA + 20K in different GICs (less than 5 years)
5. CASH account Joint for me and my mother: 80K HISA + 20K in different GICs (less than 5 years)


I understand that all our $$$ will be insured 100%, regardless that everyone of us has also TFSA in this bank. IAm I correct?


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## carverman

http://www.cdic.ca/Calculate/JointDeposits/Pages/default.aspx


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## gibor365

carverman said:


> http://www.cdic.ca/Calculate/JointDeposits/Pages/default.aspx


I've read it, and published my understanding above 
Not clear for me if GIC is added to Saving account for 100K calculatuon (assuming both joints for me and my wife)


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## Beaver101

At the beginning of that page, it says:

*What’s covered?
CDIC insures from $1 to $100,000 of eligible deposits payable in Canada, in Canadian dollars. We calculate your insured deposits all held (jointly) in the same names by combining the amounts in:

Accounts
•savings accounts
•chequing accounts.
Financial products

•GICs or other term deposits with an original term of 5 years or less
•money orders, certified cheques and bank drafts issued by CDIC members.

These deposits must be held in Canadian dollars at a CDIC member.*

Btw, there're 2 more joint account coverage possibilities: you and your son. Your wife and your mom. :tongue-new:


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## carverman

gibor said:


> I've read it, and published my understanding above
> Not clear for me if GIC is added to Saving account for 100K calculatuon (assuming both joints for me and my wife)


A GIC issued by a Major bank and a member of the CDIC, is considered savings and protected up to $100,000 CANADIAN dollars by the CDIC gov't insurance.
You can have several GICs owned by you (even jointly with a member of your family) at the same bank, which are protected by CDIC.... up to a MAXIMUM OF $100,000 CANADIAN.
If you decide to purchase another GIC tthat raises the value of all the GICs and savings you own at the *same bank* over $100,000.... and the bank fails...you will NOT be protected by CDIC for *any amount over the $100,000 of savings that you had with your bank. * It is the gov'ts insurance plan and like any insurance plan, you are protected up
to the maximum of your policy..anything over that is your loss. 

This is the way I understand it and I have several GICs with my bank as well as regular savings and a TFSA. Just don't go over $100k (combined savings) with the same BANK,
if your are worried about your money being safe and you will be ok. The Banks central computers keep track of your money and savings, not the individual branch, so the only way
you could even lose your deposits.... is if the major bank you deal with.... collapsed due to insolvency (bankrupt). That hasn't happened in Canada since the dirty thirties, but there
was an Alberta bank (not one of the BIG FOUR banks) that did go bankrupt, back in the 70s, from what I remember.


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## gibor365

carverman said:


> you could even lose your deposits.... is if the major bank you deal with.... collapsed due to insolvency (bankrupt). That hasn't happened in Canada since the dirty thirties, but there
> was an Alberta bank (not one of the BIG FOUR banks) that did back in the 70s, from what I remember.


But our money not in major bank , but in Poeples Trust...this is why I want to make sure that we have CDIC insurance that covers everything...

Also, I understand that TFSA is conted separately... and if I hold in CASH account 100K in HISA+GIC and another 20K in TFSA HISA- Iwould be covered 100%. Correct?


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## james4beach

My advice: always stay below the CDIC maximum. If in any doubt about how the maximum is applied, stay below 100k per institution. Don't risk any uncertainty.

There are over 50 member institutions of CDIC, meaning that you can deposit $5 million in Canadian banks and still have it fully insured by the government.


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## carverman

james4beach said:


> My advice: always stay below the CDIC maximum. If in any doubt about how the maximum is applied, stay below 100k per institution. Don't risk any uncertainty.
> 
> There are over 50 member institutions of CDIC, meaning that you can deposit $5 million in Canadian banks and still have it fully insured by the government.


True, as long as you don't have all 5 million of your life's savings deposited in the same MAJOR BANK or TRUST COMPANY. If the banking institution is not a member of the CDIC gov't regulated insurance corporation..you better find out how much of your savings are protected...... and what the guarantees are (if any) if the bank fails for ANY reason.


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## carverman

gibor said:


> But our money not in major bank , but in Poeples Trust...this is why I want to make sure that we have CDIC insurance that covers everything...
> 
> Also, I understand that TFSA is conted separately... and if I hold in CASH account 100K in HISA+GIC and another 20K in TFSA HISA- Iwould be covered 100%. Correct?


ASccording to the CDIC rules as I understand them, the *CDIC covers up to $100K of your life's savings. * It was set up by the federal gov't to ensure that people didn't
lose their life savings because of a bank failure. The rules are clear..up to $100k for each person who has savings with a particular bank (not a specific branch) but the actual
bank that has branches all over the country. If you are worried about CDIC protection kicking in someday and bailing you out..safest thing to do is...
....don't put your eggs all in one basket. 

TFSA is a savings account and is included with all savings accounts in your name (or jointly) along with any residual amount in a your checking account. Mutual funds are not protected by CDIC, so if you want to invest in mutual funds which may pay higher returns..find out from your bank what your options are. 
Bear in mind that mutual funds fluctuate in VALUE in your investment portfolio and in bad years when the economy is down you could end up with less than what you started with. 
My rule of thumb is: if you can't afford to lose 25-50% of money you have invested in mutual funds through your banking institution...find safer alternatives.


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## PoolAndRapid

..


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## carverman

PoolAndRapid said:


> That's incorrect, TFSAs are considered a separate account and are not lumped in with chequing and savings accounts per person/joint agreement. So, for example, you could have 75k in a regular savings account + 50k in a TFSA at the same CDIC insured institution *and you would be covered for the 125k spread across both accounts in the case of a failure.*
> 
> To clear up this kind of confusion the CDIC has a handy calculator on their website: http://www.cdic.ca/Pages/Calculator.aspx


???? 
http://www.cdic.ca/Coverage/TFSA/Pages/default.aspx


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## andrewf

Carver, I think you're confused by this example, right?



> For Example...
> 
> Say you have a GIC (with an original term to maturity of 4 years) and a savings account – both held in a TFSA. How much would you get from CDIC if your financial institution were to fail? CDIC would add up the amounts in the eligible accounts and products in your TFSA and pay up to $100,000 of the total. So:
> 
> If, in your TFSA, you had $1,500 in the GIC and $700 in the savings account, for a total of $2,200, you would receive $2,200 from CDIC.
> * If, in your TFSA, you had $95,000 in the GIC and $25,000 in the savings account, for a total of $120,000, you would receive $100,000 from CDIC.*
> 
> - See more at: http://www.cdic.ca/Coverage/TFSA/Pages/default.aspx#sthash.nDQFYDnI.dpuf


In that example, all $120k are in the TFSA. In P&A's example, $75k is non-registered, while $50k is in the TFSA. No contradiction.


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## carverman

andrewf said:


> Carver, I think you're confused by this example, right?
> 
> In that example, all $120k are in the TFSA. In P&A's example, $75k is non-registered, while $50k is in the TFSA. No contradiction.


Thanks Andrew. it's good to have this discussion to clarify how much is covered by CDIC. with the various investment options.


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## gibor365

Also , i'd like to understand how CDIC process is working.... Assuming May 30 bank declares bankrupcy.... is that mean that on this date May 30 all accounts in the bank will be locked and check for $100K eligible coverage will be processed?
So, if I understand correctly, if On May 28 , I had 200K in my account and my wife had $0 on hers.... On May 29 I transfered 100K to my wife account, and on May 30 bank declares bankrupcy... would we be eligible for all $200K ?


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## fraser

I am not certain what happens. I have seen several credit unions go under. The public never really noticed it though. They were typically being watched by the provincial supervisor. When the assets fell, the supervisor or whatever would have a heart to heart with the board, and with credit union central officers. The troubled credit union would be seen to have been taken over by another, usually larger credit union. No one lost money, business as usual.

As I recall, the Bank of BC was not in great shape when HSBC bought it. Not sure if this was precipitated by federal supervision or if it was just coincidence that the bank was doing poorly and HSBC wanted to get a toehold in Canada.


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## gibor365

CIDC insured Canadian financial failures in recent history had 
•23 financial institutions failed in the 1980s
•There were 18 failures in the 1990s
•The last financial institution failure in Canada occurred in 1996, when Security Home Mortgage Corp. collapsed

i wasn't living those times in Canada and was wondering why so many financial failures happened in 80's and 90's and none in last 18 years? Did CDIC changed rules or something else?


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## carverman

Yes, I remember vaguely a couple of the western banks that failed in the 80s. 
That's why I stick to the major banks...don't have to worry about collecting the CDIC insurance, even if they pay diddly squat these days in interest on savings. :biggrin:



> The failure of the two small western banks in 1985 had serious consequences, some of which persisted for more than a decade.
> Two additional banks, the Bank of British Columbia and the Continental Bank of Canada, which also depended on wholesale deposit funding, proved unable
> to weather the period of extreme caution about institutions that relied on such ﬁnancing. Both needed liquidity support from the Bank of Canada, and
> both ended by merging with larger banks. In addition to these developments caused by “contagion” among similar institutions, the extensive court
> proceedings surrounding the closures of the CCB and the NBC continued for a full 15 years.
> In retrospect, it is surprising to note that all this could result from problems originating in less than one per cent of the banking system


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## fraser

Some may have failed in the early eighties when mortgage interest rates hit the 21 percent range, foreclosures were high, and property values fell.

The only failure that I can remember getting any publicity was I think Principal Trust from Edmonton. I suspect that the public did not really see many failures simply because they have often appeared to the public as mergers, amalgamations,etc. instead of failures. A failed financial institution is not something that the industry or the supervisory body wants to publicize. 

The bottom line is that business continued on, and depositors did not loose money or immediate access to the funds-to my knowledge.


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## carverman

fraser said:


> The only failure that I can remember getting any publicity was I think *Principal Trust from Edmonton*. I suspect that the public did not really see many failures simply because they have often appeared to the public as mergers, amalgamations,etc. instead of failures. A failed financial institution is not something that the industry or the supervisory body wants to publicize.


This was the "bank" (trust company) that I was thinking of. It happened so long ago that I couldn't even remember the name. 
A few years ago *up to the 90s), CDIC only insured up $60,000 of depositor's savings. Then they raised it to $100,000 to keep up with the times, as many depositors have more than that
in banks that are CDIC members.


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## OhGreatGuru

gibor said:


> CIDC insured Canadian financial failures in recent history had
> •23 financial institutions failed in the 1980s
> •There were 18 failures in the 1990s
> •The last financial institution failure in Canada occurred in 1996, when Security Home Mortgage Corp. collapsed
> ...


And, to the best of my knowledge, no depositors lost any money in any of these failures. They were all taken over or bought out by other institutions. Nor does CDIC tell you if they had to make any insurance payments for any of these failures. CDIC likes to put this on their web site to justify their existence.


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## birdman

In Kelowna there was an institution I believe called Teacher Housing and Investment Cooperative which gathered deposits (I think GIC's) and paid a higher than market rate. Presumably they then loaned the money out. In any event they went under and a recent search showed they went out of business (I think bankrupt) in 1985. I had a friend who lost money there and I think he thought they were a credit union which they were not- they were a cooperative. Don't know much about it but I think it was largely unregulated. I doubt if this would be allowed to occur now due to the strict governance by the provincial Financial Institutions Commission. However, it goes to show that you have to know what you are investing in. I have a couple of MIC's which are doing fine but have no guarantee with the only thing securing my investment in the case of liquidation being the value of the underlying security. At least I understand the risk/reward and am comfortable with it.


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## martin15

gibor said:


> Also , i'd like to understand how CDIC process is working.... Assuming May 30 bank declares bankrupcy.... is that mean that on this date May 30 all accounts in the bank will be locked and check for $100K eligible coverage will be processed?
> So, if I understand correctly, if On May 28 , I had 200K in my account and my wife had $0 on hers.... On May 29 I transfered 100K to my wife account, and on May 30 bank declares bankrupcy... would we be eligible for all $200K ?


You should have a serious look at what happened in Cyprus last March.
Everything you thought about banks and government behaving in a responsible manner went out the window.
In your specific example, if it's all in the same bank, maybe. If not, money was 'in transit', and bye bye.
With your other post, you may be technically correct with the joint account and money splitting, 
but I would never keep more than 100k with any one institution.
If you are concerned, spread it out.


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## carverman

martin15 said:


> Y
> but I would never keep more than 100k with any one institution.
> If you are concerned, spread it out.


We really can't use Cyprus and Greece as examples of good banking safeguards. :biggrin:

I fully agree with you on the second point. Although bank failures in Canada's 4 major banks are unheard of, if one is worried about CDIC and the maximum they will
cover for a depositors life savings, best to spread it around to other MAJOR banks and you can sleep like a baby at night knowing that your money is safe with them too.


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## Karen

You don't necessarily have to spread iit around among other banks. I keep all my money in GICs at Scotiabank and the bank assures me that it's all covered, although it totals a lot more than $100,000. CDIC covers deposits in RRSPs, RRIFs, TFSAs, and unregistered accounts separately. If you have more cash than would be covered at The Bank of Nova Scotia itself, they will deposit further funds with one or more of what they call their "Scotiabank Group Members" which are also covered by CDIC, namely: Scotia Mortgage Corporation, Montreal Trust Company of Canada, and National Trust Company. I have deposits in each of those types of accounts at each of these institutions, but they are all listed on my Scotiabank statement as Scotiabank investments.

I find that I have to keep reminding my personal banking rep not to let any of the accounts go over $100,000 every time I renew a GIC or add another one; they don't seem to consider it important. In fact, I get the distinct impression that they think I'm a bit obsessed. I know our major banks are extremely unlikely to go broke, but to me it's foolish to take the chance when you don't have to.


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## carverman

Karen said:


> I find that I have to keep reminding my personal banking rep not to let any of the accounts go over $100,000 every time I renew a GIC or add another one; they don't seem to consider it important. In fact, I get the distinct impression that they think I'm a bit obsessed. I know our major banks are extremely unlikely to go broke, but to me it's foolish to take the chance when you don't have to.


There is an old saying.."belts and suspenders to make sure..if you have any doubts." Even if there is another recession some time in our remaining lifetimes, we probably have nothing to
worry about as long as our deposits are with the major banks...However, if I should ever win a 50 million lottery..then I might worry. :biggrin:


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## Karen

> However, if I should ever win a 50 million lottery..then I might worry. :biggrin:


Me too... but I'm sure we both agree that it would be a nice worry to have!


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## CPA Candidate

There are some really risk adverse people on this site.

The chances of experiencing a GIC or bank account default is lower than the risk to your mortal being every time you get into a moving vehicle. Over the past decade, more than 20,000 Canadians have died in motor vehicle accidents; how many lost their money when their bank went under?

My point is every single one of us accepts more risk, to more precious assets, on daily basis without thinking twice about it.


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## james4beach

CPA Candidate, sure there are greater risks in life but that's not the point.

Why take unnecessary risk? As you point out, we already have enough risks in life. Why take on another one that you don't have to?

The government offers, via CDIC, very generous insurance on deposits. It's pretty easy to make sure that all your deposits are CDIC insured. You just have to spread it out among issuers. Don't exceed the 100k maximum per member bank.


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## CDIC_SADC

james4beach said:


> CPA Candidate, sure there are greater risks in life but that's not the point.
> 
> Why take unnecessary risk? As you point out, we already have enough risks in life. Why take on another one that you don't have to?
> 
> The government offers, via CDIC, very generous insurance on deposits. It's pretty easy to make sure that all your deposits are CDIC insured. You just have to spread it out among issuers. Don't exceed the 100k maximum per member bank.


This is Doug from CDIC. You’re absolutely right that CDIC deposit insurance is free and automatic. But you don’t have to spread deposits among financial institutions. You can also maximize your coverage by depositing your money in our separately insurable categories for up to $100,000 each _within the same bank_. To find out more, visit us at cdic.ca.


Doug Watt
CDIC Communications


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## fraser

Doug is right on of course.

We use multiple accounts in two member firms. It is a snap. We want CDIC but we also want the competitive high daily interest 1.9 percent accounts that are offered by a few CDIC members. Our big bank offers a whopping 1.1 percent non competitive rate. 

That does not work for us. When it come to interest income...more is better than less.


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## carverman

Karen said:


> Me too... but I'm sure we both agree that it would be a nice worry to have!


A Kanata (Ottawa) lady has just claimed her $48,000,020 prize. Now SHE will have to worry, how much of that is covered by CDIC.
If it is all put into one financial instutution..that would be 480 savings accounts of $100k each. Talk about keeping track of that electronically to see how much your investment is doing
even if the original winnings are tax free, but the interest paid by the banks (1.25%) for most savings, is not tax free...$600,000? per year and that will put her in the highest tax bracket.


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## peterk

fraser said:


> Doug is right on of course.
> We want CDIC but we also want the competitive high daily interest 1.9 percent accounts that are offered by a few CDIC members. Our big bank offers a whopping 1.1 percent non competitive rate.
> 
> That does not work for us. When it come to interest income...more is better than less.



I'll be hitting the CDIF limit sometime this summer at Canadian Direct Financial (Canadian Western Bank) and trying to decide what to do about it. Obviously it is taking on more risk by going over the limit, especially at a smaller provincial bank instead of one of the bix 6. From what I've read in this thread though, I kind of feel that the risk is minimal, and it's very ambiguous/vague/unknown of what would actually happen if a bank "failed" anyways. 

What is very real though, is my loss of interest income by moving money out of this high interest paying bank, and my loss of time and headache by dealing with multiple banks when just one will suffice.

Where do uninsured deposits sit on the hiearchy of creditors? Surely still before bond holders? Pensioners?


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## NorthernRaven

peterk said:


> I'll be hitting the CDIF limit sometime this summer at Canadian Direct Financial (Canadian Western Bank) and trying to decide what to do about it. Obviously it is taking on more risk by going over the limit, especially at a smaller provincial bank instead of one of the bix 6. From what I've read in this thread though, I kind of feel that the risk is minimal, and it's very ambiguous/vague/unknown of what would actually happen if a bank "failed" anyways. What is very real though, is my loss of interest income by moving money out of this high interest paying bank, and my loss of time and headache by dealing with multiple banks when just one will suffice.


There's no million dollar prize or moral medal for maximizing savings interest…  If an account is getting close to the $100K CDIC limit, peel off $10K and stick in ING (er, Tangerine) and forget about it. The loss of interest is no more than $5/month, surely worth the peace of mind. Conversely, there's nothing magical about $100,001 that invalidates your insurance. If they go bankrupt, you'll get $100K back from CDIC eventually, and at the very worst lose the few thousand over the limit.


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## CDIC_SADC

gibor said:


> Also , i'd like to understand how CDIC process is working.... Assuming May 30 bank declares bankrupcy.... is that mean that on this date May 30 all accounts in the bank will be locked and check for $100K eligible coverage will be processed?
> So, if I understand correctly, if On May 28 , I had 200K in my account and my wife had $0 on hers.... On May 29 I transfered 100K to my wife account, and on May 30 bank declares bankrupcy... would we be eligible for all $200K ?


Apologies for the delayed response to your inquiry, Gibor.

For the purposes of your question, we assume that the inquirer has $200,000 in eligible deposits – e.g. in Canadian dollar chequing or savings accounts – and on May 29 he transfers $100,000 into an eligible deposit in his wife’s name, and there is a bank failure on May 30. Since individuals are each entitled to CDIC deposit insurance of up to $100,000, the inquirer and his wife could each qualify for separate coverage for deposits in their individual names. CDIC also provides additional coverage for joint deposits of up to $100,000 combined. 

CDIC must rely on the records of the bank to calculate its deposit insurance payments. If the bank completely processes the transfer on May 29, then both the inquirer and his wife would be separately covered up to the $100,000 deposit insurance limit. However, depending on the time of day and how the transaction is done (e.g. cash, cheque, teller, online) the bank may or may not have completely processed the transfer on May 29.

Doug Watt
CDIC Communications


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## Beaver101

Karen said:


> You don't necessarily have to spread iit around among other banks. I keep all my money in GICs at Scotiabank and the bank assures me that it's all covered, although it totals a lot more than $100,000. CDIC covers deposits in RRSPs, RRIFs, TFSAs, and unregistered accounts separately. *If you have more cash than would be covered at The Bank of Nova Scotia itself, they will deposit further funds with one or more of what they call their "Scotiabank Group Members" which are also covered by CDIC, namely: Scotia Mortgage Corporation, Montreal Trust Company of Canada, and National Trust Company. * I have deposits in each of those types of accounts at each of these institutions, but they are all listed on my Scotiabank statement as Scotiabank investments.
> 
> I find that I have to keep reminding my personal banking rep not to let any of the accounts go over $100,000 every time I renew a GIC or add another one; they don't seem to consider it important. In fact, I get the distinct impression that they think I'm a bit obsessed. I know our major banks are extremely unlikely to go broke, but to me it's foolish to take the chance when you don't have to.


 ... was re-reading this thread to get a refresher on the CDIC rules and from what I understood from their rules pamphlet, even you spread your saving accounts (eg. regular savings, HISA) amongst an affiliated/sister company of a bank (eg. BMO and BMO Investorline, the maximum amount you would be insured under CDIC is $100,000.) This would apply same to GICs. Eg. you have a GIC of $120,000 with BMO, and then got another GIC of $50,000, only $100,000 is insured under BMO group. So this is contradictory to what has been posted above by Karen. Unless Montreal Trust and National Trust are are not part of the Scotia Group Members (firm names are different) as with Tangerine (previously ING). The 3 bank/trusts are on CDIC members' list however. 

Now for a silly test question - is the deposit (GIC say) insured under the issuer or under the brokerage? Ie. I purchase 2 GIC in excess of $100,000, one issued with BMO, another with President's Choice bank, is the total amount insured only $200,000 under CDIC? Or is it just $100,000 since it's handled by the BMO's brokerage/Investorline.


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## gibor365

> g. you have a GIC of $120,000 with BMO, and then got another GIC of $50,000, only $100,000 is insured under BMO group.


 but if you have 100K GIC under your name and 30K GIC under joint name (ex. you and your spouse), all 150K will be insured... and you can have another 100K GIC or HISA under your spouse name....



> Now for a silly test question - is the deposit (GIC say) insured under the issuer or under the brokerage? Ie. I purchase 2 GIC in excess of $100,000, one issued with BMO, another with President's Choice bank, is the total amount insured only $200,000 under CDIC? Or is it just $100,000 since it's handled by the BMO's brokerage/Investorline.


 good question  I have 100K in GICs in Peoples Trust, I also can buy Peoples Trust GIC in my CIBC EI discount brokerage account.... have no idea is latest one will be also insured.... so trying not to have overlapping...


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## NorthernRaven

Beaver101 said:


> ... was re-reading this thread to get a refresher on the CDIC rules and from what I understood from their rules pamphlet, even you spread your saving accounts (eg. regular savings, HISA) amongst an affiliated/sister company of a bank (eg. BMO and BMO Investorline, the maximum amount you would be insured under CDIC is $100,000.) This would apply same to GICs. Eg. you have a GIC of $120,000 with BMO, and then got another GIC of $50,000, only $100,000 is insured under BMO group. So this is contradictory to what has been posted above by Karen. Unless Montreal Trust and National Trust are are not part of the Scotia Group Members (firm names are different) as with Tangerine (previously ING). The 3 bank/trusts are on CDIC members' list however.
> 
> Now for a silly test question - is the deposit (GIC say) insured under the issuer or under the brokerage? Ie. I purchase 2 GIC in excess of $100,000, one issued with BMO, another with President's Choice bank, is the total amount insured only $200,000 under CDIC? Or is it just $100,000 since it's handled by the BMO's brokerage/Investorline.


If I understand, hypothetical you has bought these GICs through your brokerage account? I believe you would have $200,000 in coverage no matter what. The broker does not issue CDIC insurance; the relationship is between CDIC and the name on the deposit. 

The tricky bit is that "name on deposit". For stocks, generally a brokerage would hold them in "nominee" or "street" name, so they are held by "ABC Brokerage in trust for Beaver101", not by "Beaver101" directly. This lets them loan out for short sales, move and sell them for you easily, etc. ISA purchases (CDIC deposits) are the same thing - normally in street name, not yours. I imagine GICs are the same thing, although you'd want to check. So each GIC is held by "ABC Brokerage, in trust for Beaver101".

So you could have those BMO and PCF GICs at BMO's brokerage, and then go to TD Waterhouse and buy the same amount from the same banks. Both would be covered by CDIC and you'd have $400,000 in coverage, because "BMO Investorline, in trust for Beaver101" is a separate CDIC relationship from "TD Waterhouse, in trust for Beaver101", and each has its own set of CDIC maximums with each bank. Here's a CDIC info bulletin that covers some of this.

As a final note, if your brokerage should go bust, things held in street/nominee name likely don't go directly to you, but work their way as assets through the liquidation/bankruptcy proceedings. Probably no difference in the end for most given the CIPF insurance and whatnot, but a detail none the less.


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## Beaver101

gibor said:


> but if you have 100K GIC under your name and 30K GIC under joint name (ex. you and your spouse), all 150K will be insured... and you can have another 100K GIC or HISA under your spouse name....
> 
> good question  I have *100K in GICs **in Peoples Trust*, I also can buy *Peoples Trust GIC in my CIBC EI discount brokerage *account.... have no idea is latest one will be also insured.... so trying not to have overlapping...


 ... correct (or that's the way I understand the CDIC's rules pamphlet) that you get an extra $100K insured per savings or GIC if joint with your spouse or another accountholder. 

However, on your second scenario, I think you would only be insured up to $100K since both products are a "GIC" and it's with "People's Trust (same institution)".


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## Beaver101

NorthernRaven said:


> If I understand, hypothetical you has bought these GICs through your brokerage account? I believe you would have $200,000 in coverage no matter what. The broker does not issue CDIC insurance; the relationship is between CDIC and the name on the deposit.


 ... correct the scenario is that the GICs are bought through the brokerage and it does make sense to be insured up to $200K since the relationship is the name on the deposit (owner) and CDIC.



> The tricky bit is that "name on deposit". For stocks, generally a brokerage would hold them in "nominee" or "street" name, so they are held by "ABC Brokerage in trust for Beaver101", not by "Beaver101" directly. This lets them loan out for short sales, move and sell them for you easily, etc. *ISA purchases (CDIC deposits) are the same thing *- normally in street name, not yours. I imagine GICs are the same thing, although you'd want to check. So each GIC is held by "ABC Brokerage, in trust for Beaver101".


 ... however I don't think ISA (Investment Savings Account=Cash) works the same way at the brokerage to qualify for an additional $100K insured amount as a GIC. That cash account would be considered / aggregated to any savings account you have with the non-brokerage arm (ie. BMO bank) up to $100K if I understand what's published on BMO's website re their relationship with CDIC (as each bank does) . This is what I was trying to get at with Karen's example although I'm not certain if the Montreal / National Trust she mentioned is indeed part of the Scotia group of companies.



> So you could have those BMO and PCF GICs at BMO's brokerage, and then go to TD Waterhouse and buy the same amount from the same banks. *Both would be covered by CDIC and you'd have $400,000 in coverage, because "BMO Investorline, in trust for Beaver101" is a separate CDIC relationship from "TD Waterhouse, in trust for Beaver101", and each has its own set of CDIC maximums with each bank. * Here's a CDIC info bulletin that covers some of this....


I don't think it would be up to $400,000 insured for reason as explained above or the GIC is not technically held in trust at the brokerage. But it would be if the GIC was bought from say TD Waterhouse or CIBC. Nevertheless, thanks for the url bulletin link - (I'm unable to view it at the moment but will do so later on another computer with Adobe Reader) to get a better understanding of the "held-in-trust" part by the brokerage.



> As a final note, if your brokerage should go bust, things held in street/nominee name likely don't go directly to you, but work their way as assets through the liquidation/bankruptcy proceedings. Probably no difference in the end for most given the CIPF insurance and whatnot, but a detail none the less.


 .. okay, thanks for this detail. In effect under CIPF insurance for brokerages, investors are covered up to 

" ... $1-million for “general accounts,” typically a cash or margin account, and $1-million for “separate accounts” such as registered retirement savings plans and registered retirement income funds. ", correct? 

Or as read here http://www.theglobeandmail.com/globe-investor/investment-ideas/what-protection-do-you-have-if-your-broker-goes-broke/article19783968/


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## NorthernRaven

Beaver101 said:


> ... however I don't think ISA (Investment Savings Account=Cash) works the same way at the brokerage to qualify for an additional $100K insured amount as a GIC. That cash account would be considered / aggregated to any savings account you have with the non-brokerage arm (ie. BMO bank) up to $100K if I understand what's published on BMO's website re their relationship with CDIC (as each bank does) .


I think you are wrong for most ISAs, as the CDIC info bulletin calls the "nominee" approach "more common", and things like Manulife explicitly state that they are nominee products.



Beaver101 said:


> I don't think it would be up to $400,000 insured for reason as explained above or the GIC is not technically held in trust at the brokerage. Thanks for the url bulletin link - I'm unable to view it at the moment but will do so to get a better understanding of the "held-in-trust" part by the brokerage.


Perhaps GICs are different, or a mix, although again Manulife indicates nominee GICs for brokerages. You could check with your broker for details on a specific GIC, but I think the assumption would be nominee name for these as well, although I've never held GICs inside a brokerage account or bought from a GIC broker (which I believe is merely an agent and the GICs are in your name, not nominee).


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## Beaver101

^ Same thing here, never purchased a GIC through a brokerage so good idea to directly ask the brokerage ... they gotta know this. Cheers, each:


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## CDIC_SADC

Beaver101 said:


> ... was re-reading this thread to get a refresher on the CDIC rules and from what I understood from their rules pamphlet, even you spread your saving accounts (eg. regular savings, HISA) amongst an affiliated/sister company of a bank (eg. BMO and BMO Investorline, the maximum amount you would be insured under CDIC is $100,000.) This would apply same to GICs. Eg. you have a GIC of $120,000 with BMO, and then got another GIC of $50,000, only $100,000 is insured under BMO group. So this is contradictory to what has been posted above by Karen. Unless Montreal Trust and National Trust are are not part of the Scotia Group Members (firm names are different) as with Tangerine (previously ING). The 3 bank/trusts are on CDIC members' list however.
> 
> Now for a silly test question - is the deposit (GIC say) insured under the issuer or under the brokerage? Ie. I purchase 2 GIC in excess of $100,000, one issued with BMO, another with President's Choice bank, is the total amount insured only $200,000 under CDIC? Or is it just $100,000 since it's handled by the BMO's brokerage/Investorline.


Hi this is Jeams from CDIC. 

Some CDIC member institutions such as Bank of Montreal have affiliates that are CDIC members in their own right. Bank of Montreal is a CDIC member institution as well as its two subsidiaries (Bank of Montreal Mortgage Corporation and BMO Trust Company). Insured deposits held at Bank of Montreal will be insured separately from insured deposits held at each of the affiliated members up to $100,000 per CDIC’s category if any of the mentioned members were to fail. 

Same would apply to Bank of Nova Scotia and its five affiliates:
-	Montreal Trust Company of Canada
-	National Trust Company
-	Scotia Mortgage Corporation
-	Dundee Bank of Canada
-	Tangerine Bank 


As for the brokered deposits question, the GICs purchased through BMO InvestorLine and issued by Bank of Montreal and President’s Choice Bank are insured up to $100,000 at each Bank.

Jeams Cherestal
CDIC Communications


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## Beaver101

^ Jeams, thank you for your quick reply. 

So in effect on the bank's brokerage deposit response above - GICs in CD$ (all under 1 owner and below 5 years term) purchased at Bank of Montreal and BMO Investorline (all issued by Bank of Montreal) are insured up to *$100,000 *only. Correct?

Another example - GICs in CD$ (all under 1 owner and below 5 years term) purchased at Bank of Montreal and BMO Investorline (one issued by Bank of Montreal, the other issued by Bank of Montreal Mortgage Corporation) are insured up to *$200,000*? Correct? 

Thanks again.


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## gibor365

Another question  If you have 100K in GIC at CDIC insured institution , only principal 100K would be insured or also interest earned until this institution is going bankrupt?


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## NorthernRaven

Beaver101 said:


> ^ Jeams, thank you for your quick reply.
> 
> So in effect on the bank's brokerage deposit response above - GICs purchased at Bank of Montreal and BMO Investorline are insured up to $100,000 only. Correct?


You need to present a clear example, and to two parties (BMO Investorline, and perhaps CDIC).

If someone:
1) purchases $100,000 in GICs, in their name, not in any tax-sheltered account, directly from BMO (not through Investorline brokerage account), issued by, say, "Bank of Montreal Mortgage Corporation".
2) purchases an additional $100,000 in GICs through their BMO Investorline brokerage account, again not tax-sheltered, also issued by "Bank of Montreal Mortgage Corporation"

What you need to know is:
a) From Investorline, is the purchase in (2) held in trust in "nominee name", or directly in the customer's name.
b) from CDIC, if the answer to a) is "in trust", are (1) and (2) considered separate CDIC deposits for insurance purposes, per the (2010 info bulletin I linked to).

I suspect if (a) is "nominee", then (b) is "separate", but I don't know how brokerages handle (a). The CDIC response uses the phrase "brokered deposit". That sounds like my understanding of what a GIC broker does - he acts as your agent but the GICs are directly in your name. In that case, the answer to (b) would probably be "not separate". But since brokerages hold stocks and ISA deposits in "nominee name", there is certainly a chance that GICs are as well. I don't know if the CDIC response assumed or knows that this isn't the case, or didn't consider it at all.

I'd call BMO Investorline and ask directly about GICs and nominee name as a first step if you are really interested, and let us know.


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## carverman

gibor said:


> Another question  If you have 100K in GIC at CDIC insured institution , only principal 100K would be insured or also interest earned until this institution is going bankrupt?





> CDIC insures deposits that are held in a CDIC member institution, in Canadian dollars. The deposits must be held in eligible accounts and financial products (see sidebar). CDIC covers *up to $100,000 (including principal and interest)*.
> 
> See more at: http://www.cdic.ca/Calculate/Pages/default.aspx#sthash.qxPqJ5BY.dpuf


 If you have GICs that mature after 5 years and the institution fails, you are not covered for any GICs that are longer than 5 years..although you can reinvest for another 1- 5 years. 

I believe the maximum of all combined savings/GIC/Checking accounts cannot exceed $100k per institution.
So, if you happen to have more than that spread over a few accounts at the same institution and you are considered about failure..you may be out of luck on anything over $100K..but that's my opinion.

If it was me and I knew my financial institution had failed, and I had $100k invested in that institution , I would be more concerned about my principal amount over any interest earned.
My bank pays the interest earned on each GIC to my savings account.


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## gibor365

> I believe the maximum of all combined savings/GIC/Checking accounts cannot exceed $100k per institution.


 per institution and per account holder.... so if you have 100K under your name and 100K under you and your spouse name (joint) -> all 200K are insured.



> I would be more concerned about my principal amount over any interest earned.


 you don't believe CDIC?!



> The deposits must be held in eligible accounts and financial products (see sidebar). CDIC covers up to $100,000 (including principal and interest).


 in my example I should've write $95K + 5K earned interest .... so looks like interest is also insured if total are less than 100K


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## Beaver101

NorthernRaven said:


> You need to present a clear example, and to two parties (BMO Investorline, and perhaps CDIC).
> 
> If someone:
> 1) purchases $100,000 in GICs, in their name, not in any tax-sheltered account, directly from BMO (not through Investorline brokerage account), issued by, say, "Bank of Montreal Mortgage Corporation".
> 2) purchases an additional $100,000 in GICs through their BMO Investorline brokerage account, again not tax-sheltered, also issued by "Bank of Montreal Mortgage Corporation"
> 
> What you need to know is:
> a) From Investorline, is the purchase in (2) held in trust in "nominee name", or directly in the customer's name.
> b) from CDIC, if the answer to a) is "in trust", are (1) and (2) considered separate CDIC deposits for insurance purposes, per the (2010 info bulletin I linked to).
> 
> I suspect if (a) is "nominee", then (b) is "separate", but I don't know how brokerages handle (a). The CDIC response uses the phrase "brokered deposit". That sounds like my understanding of what a GIC broker does - he acts as your agent but the GICs are directly in your name. In that case, the answer to (b) would probably be "not separate". But since brokerages hold stocks and ISA deposits in "nominee name", there is certainly a chance that GICs are as well. I don't know if the CDIC response assumed or knows that this isn't the case, or didn't consider it at all.
> 
> I'd call BMO Investorline and ask directly about GICs and nominee name as a first step if you are really interested, and let us know.


 ... I'll use the examples in your post to clarify for CDIC (as you have explained it very well or better, thank you) and will ask BMO Investorline later and let you know what their response is. But I would think CDIC would know best.  :wink:


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## Beaver101

gibor said:


> ...
> 
> you don't believe CDIC?!
> 
> ...


 ... yes we do believe in CDIC to protect our $$$!


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## carverman

gibor said:


> per institution and per account holder.... so if you have 100K under your name and 100K under you and your spouse name (joint) -> all 200K are insured.


That makes sense as the joint account with your wife is still "per account holder" and she is a holder of that account.


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## Beaver101

Beaver101 said:


> ... yes we do believe in CDIC to protect our $$$!


 .. I'm still hoping CDIC will reply to posts 61 & 63 above.


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## CDIC_SADC

Beaver101 said:


> ^ Jeams, thank you for your quick reply.
> 
> So in effect on the bank's brokerage deposit response above - GICs in CD$ (all under 1 owner and below 5 years term) purchased at Bank of Montreal and BMO Investorline (all issued by Bank of Montreal) are insured up to *$100,000 *only. Correct?
> 
> Another example - GICs in CD$ (all under 1 owner and below 5 years term) purchased at Bank of Montreal and BMO Investorline (one issued by Bank of Montreal, the other issued by Bank of Montreal Mortgage Corporation) are insured up to *$200,000*? Correct?
> 
> Thanks again.


Beaver101,

Canadian dollar GICs (5 years or less) held in one category issued by one member institution whether it’s purchased at the institution’s branch or through an investment dealer are protected and insured up to $100,000 (principal and interest combined). 

GICs issued by two different member institutions (Bank of Montreal and Bank of Montreal Mortgage Corporation) are insured at each institution up to $100,000. Total coverage would indeed be $200,000.

Furthermore, an investment dealer may hold a GIC issued by a CDIC member as nominee for one of its clients. Separate coverage would be provided if the firm satisfies the trust deposit disclosure requirements of the CDIC Joint and Trust Account Disclosure By-law. 

As suggested by NorthernRaven, you may wish to contact BMO InvestorLine to find out how your accounts are set up. 

For more information on trust deposits, please visit the CDIC Frequently Asked Questions – Trustee Disclosure to Financial Institution.

Jeams Cherestal
CDIC Communications


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## CDIC_SADC

gibor said:


> per institution and per account holder.... so if you have 100K under your name and 100K under you and your spouse name (joint) -> all 200K are insured.
> 
> you don't believe CDIC?!
> 
> in my example I should've write $95K + 5K earned interest .... so looks like interest is also insured if total are less than 100K


Gibor,

The $100,000 deposit insurance coverage includes both principal and interest. If your GIC is now worth more than $100,000, that extra amount would not be protected by CDIC if the member institution goes bankrupt.

Jeams Cherestal
CDIC Communications


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## gibor365

CDIC_SADC said:


> Gibor,
> 
> The $100,000 deposit insurance coverage includes both principal and interest. If your GIC is now worth more than $100,000, that extra amount would not be protected by CDIC if the member institution goes bankrupt.
> 
> Jeams Cherestal
> CDIC Communications


Jeams, I understand it... but not clear about interest.... as an example, if I have $90,000 in GIC with 3% interest for 1 year and after 6 months I bought GIC , institution went bankrupt...
How much I should get from CDIC:
- 90,000 + 3% interest for whole year .= 92,700
or 90,000 + 3% interest for half year = 91,350?

Also, how fast CDIC will pay you after institution went bankrupt.... does it take several weeks, months years?

How CDIC pays you? Cheque? deposit to other account?


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## CDIC_SADC

gibor said:


> Jeams, I understand it... but not clear about interest.... as an example, if I have $90,000 in GIC with 3% interest for 1 year and after 6 months I bought GIC , institution went bankrupt...
> How much I should get from CDIC:
> - 90,000 + 3% interest for whole year .= 92,700
> or 90,000 + 3% interest for half year = 91,350?
> 
> Also, how fast CDIC will pay you after institution went bankrupt.... does it take several weeks, months years?
> 
> How CDIC pays you? Cheque? deposit to other account?


Gibor,

CDIC calculates and pays interest in accordance with the depositor's contracts with the failed member institution until the commencement of the winding-up (date of failure). As per your example, suppose you have a one-year term deposit and the institution is declared bankrupt by the Court with exactly six months left to go on your term, CDIC would issue a deposit insurance payment for six months’ worth of interest accrued on the deposit at the 3% per annum. 

Under the CDIC Act, CDIC is required to make deposit insurance payments “as soon as possible”. It is difficult to give a precise time frame for payment, since the time frame involved would depend upon the size of the member institution, and the circumstances of the failure. CDIC continues to enhance and improve its payment systems and procedures with the aim of minimizing, as much as is practically possible, the time between any member failure and the deposit insurance payment. CDIC’s current objective is to be ready to make payment of up to a million depositors within 20 days.

As for your question on how CDIC would issue a deposit insurance payment, CDIC will determine the most effective means of reimbursing insured deposits: either by cheque delivered by mail, or by transferring the deposits to another CDIC member institution where depositors could readily access the funds. An exception is deposits held in registered products such as RRSPs and RRIFs. CDIC would transfer registered insured deposits to another CDIC member institution, to avert the tax implications of de-registering the funds. Also, if the insured deposits are held in trust, the CDIC cheque goes to the trustee(s).


Jeams Cherestal
CDIC Communications


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## Beaver101

Beaver101 said:


> ... I'll use the examples in your post to clarify for CDIC (as you have explained it very well or better, thank you) and will ask BMO Investorline later and let you know what their response is. But I would think CDIC would know best.  :wink:


 ... update on this as I now have a clear response from BMOIL. 

Deposits at the brokerage are indeed held in trust (nominee) but for the "beneficial owner" of the GICs. Thus, the CDIC $100K insurance cap would apply to multiple GICs if issued by the same member institution (on CDIC list) even though it was bought through the brokerage. Hope this confirms the question about GICs (and CDIC insurance) bought through a brokerage. Cheers,


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## NorthernRaven

Beaver101 said:


> ... update on this as I now have a clear response from BMOIL.
> 
> Deposits at the brokerage are indeed held in trust (nominee) but for the "beneficial owner" of the GICs. Thus, the CDIC $100K insurance cap would apply to multiple GICs if issued by the same member institution (on CDIC list) even though it was bought through the brokerage. Hope this confirms the question about GICs (and CDIC insurance) bought through a brokerage. Cheers,


You seem to be saying that there would only be a single $100K coverage limit for GICs bought from, say, BMO Mortgage, even though some were directly in the customer's name at a branch, and some were in nominee name via the brokerage? If so, this is NOT what the CDIC bulletin says:


trust deposits are separate from personal deposits
the interest of a beneficiary in a trust deposit is separate from any other deposits of the beneficiary either in its personal capacity or as beneficiary in a different trust

If GICs at BMOIL are in nominee name, that should be a separate $100K limit from GICs bought from the same institution outside the brokerage account. And you would be able to buy another $100K of those same BMO GICs through another brokerage, if they were offering BMO GICs in nominee name.


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## Beaver101

NorthernRaven said:


> *You seem to be saying that there would only be a single $100K coverage limit for GICs bought from, say, BMO Mortgage, even though some were directly in the customer's name at a branch, and some were in nominee name via the brokerage? * *
> 
> If so, this is NOT what the CDIC bulletin says:
> 
> trust deposits are separate from personal deposits
> the interest of a beneficiary in a trust deposit is separate from any other deposits of the beneficiary either in its personal capacity or as beneficiary in a different trust
> *If GICs at BMOIL are in nominee name, that should be a separate $100K limit from GICs bought from the same institution outside the brokerage account. And you would be able to buy another $100K of those same BMO GICs through another brokerage, if they were offering BMO GICs in nominee name.


 ... here's the exact response from BMOIL in one sentence:



> When you purchase a GIC, it is held in BMO Investorline's name in trust for the beneficial ownership of you. If you have a GIC in the account, it would be covered upto $100,000.


So my interpretation is if you have multiple GICs through the same member issuer regardless where you(as beneficial owner) purchase it through (eg. bank or brokerage(held in trust, as nominee)), you would be covered up to $100K.

If you do not interpet this the same, then *I think CDIC should clarify their bulletin that you quoted above.*


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## NorthernRaven

Beaver101 said:


> ... here's the exact response from BMOIL in one sentence:
> 
> 
> 
> 
> When you purchase a GIC, it is held in BMO Investorline's name in trust for the beneficial ownership of you. If you have a GIC in the account, it would be covered upto $100,000.
> 
> 
> 
> So my interpretation is if you have multiple GICs through the same member issuer regardless where you(as beneficial owner) purchase it through (eg. bank or brokerage(held in trust, as nominee)), you would be covered up to $100K.
> 
> If you do not interpet this the same, then *I think CDIC should clarify their bulletin that you quoted above.*
Click to expand...

Your response from BMOIL says nothing about GICs held outside the brokerage account. GICs "held in trust with you as the beneficial owner" is NOT the same as "GICs held directly by you, not in trust". The ones in the BMOIL account are "trust deposits", and the ones you buy at the bank are not. As the CDIC bulletin clearly states, "trust deposits" are a separate category from "personal deposits". I'm pretty certain your interpretation is wrong, and now that you now how BMOIL holds the GICs, you can probably get confirmation of this (i.e. separate $100K limits) from CDIC.


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## Beaver101

> Your response from BMOIL says nothing about GICs held outside the brokerage account. GICs "held in trust with you as the beneficial owner" is NOT the same as "GICs held directly by you, not in trust".


... so who owns the GIC? me, sole owner here. Who is the issuer? Bank of Montreal.



> The ones in the BMOIL account are "trust deposits", and the ones you buy at the bank are not.


... the same question - who owns the GIC? me, sole owner. Who is the issuer? BMOIL which is a subsidiary of Bank of Montreal which equates to be the same issuer, so 2 GICs from same issuer is covered up to $100K only. Now, if I bought a GIC issued by say TD Bank (different issuer), then I get an additional $100K of insurance.



> As the CDIC bulletin clearly states, "trust deposits" are a separate category from "personal deposits".


.... I think that bulletin is meant for trust accounts such as estates (deceased owner, you could be the beneficiary). Let's see what CDIC says.



> I'm pretty certain your interpretation is wrong, and now that you now how BMOIL holds the GICs, you can probably get confirmation of this (i.e. separate $100K limits) from CDIC.


. ... again, let's see what CDIC says ... they issued that bulletin.


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## NorthernRaven

Beaver101 said:


> ... so who owns the GIC? me, sole owner here. Who is the issuer? Bank of Montreal.
> 
> ... the same question - who owns the GIC? me, sole owner. Who is the issuer? BMOIL which is a subsidiary of Bank of Montreal which equates to be the same issuer.
> 
> .... I think that bulletin is meant for trust accounts such as estates (deceased owner, you could be the beneficiary). Let's see what CDIC says.
> 
> . ... again, let's see what CDIC says ... they issued that bulletin.


Please _read_ the bulletin. It specifically states:


> Securities firms: In other cases trusts are created and the customer is the beneficiary of the trust. For example, securities firms often hold deposits for their customers in a manner that gives rise to a trustee/beneficiary relationship. A securities firm may buy a deposit on behalf of a customer in two basic ways - either directly in the customer's name (in which case the firm is merely acting as an agent for the customer), or the securities firm follows the more commonly used approach by having the deposit recorded...in the firm's name as "nominee" for its customer. *When a securities firm holds a deposit as nominee, the law implies a trust* under which the firm is the trustee depositor and the customer is the beneficiary. From the CDIC's perspective, as well as from the perspective of the member institution, *it is the firm as nominee that is entitled to the repayment of the deposit.* The customer looks to the firm for repayment.


This is quite clear, and directly addresses the situation in your BMOIL example (the bulletin also explicitly states that deposit brokers and such act as agents only, and that case does _not _create separate coverage). A trust is established by the "nominee" mechanism, and trust deposits have separate coverage from personal deposits (see bulletin quotes in previous response). Your "who is the owner? Me" is technically incorrect and misunderstands the nature of "nominee" "beneficial trust" arrangements with brokerages (a similar situation applies to your stocks held at the brokerage).


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## Beaver101

^


> Your "who is the owner? Me" is technically incorrect and misunderstands the nature of "nominee" "beneficial trust" arrangements with brokerages (a similar situation applies to your stocks held at the brokerage).


 ... again, let's see what CDIC says. I'm no CDIC expert or a lawyer. Just your average Joe Canadian.


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## CDIC_SADC

Beaver101 said:


> ^ ... again, let's see what CDIC says. I'm no CDIC expert or a lawyer. Just your average Joe Canadian.


Beaver101,

As per your scenario, BMO InvestorLine may make a deposit at XYZ Bank, a CDIC member institution, in its own name as nominee for its client “Beaver101”. Acting as a nominee means that the investment dealer holds the deposit in trust for its client. So long as BMO InvestorLine has disclosed to XYZ Bank that it holds a deposit as nominee for “Beaver101”, then if XYZ Bank were to fail BMO InvestorLine would be the one to receive any CDIC insurance payment and would receive that payment in trust for its client, “Beaver101”. As stated in the bulletin, most investment dealers arrange for deposits to be issued in their own names as nominees for their clients.

Where a securities firm makes a deposit in trust for (as nominee of) a client, the securities firm is the depositor of the deposit. The “depositor” of a deposit is the person that has rights against the CDIC member. Here, the trustee (nominee) depositor is the party with rights against the CDIC member, and so it is the “depositor” for the purposes of CDIC deposit insurance. The client has rights against the securities firm, not against the CDIC member, and the client thus is not the “depositor”.

Here are some additional information:

The CDIC Joint and Trust Account Disclosure By-law requires three criteria to be met in order for an insured deposit that is made by a securities firm in trust for (as nominee of) another person to qualify for separate CDIC deposit insurance coverage:

A. the records of the CDIC member must disclose the name and address of the securities firm that is acting as the trustee (nominee) depositor;

B. those records must disclose the fact that the insured deposit is held by the depositor in trust for (as nominee of another person (the beneficiary); and

C. those records must disclose the name and address of the beneficiary or, in certain permitted cases, such as where the trustee (nominee) depositor is a regulated securities firm, an alphanumeric code or other identifier that is linked to a record kept by the trustee (nominee) depositor that contains the beneficiary’s name and address.

If the requirements described above are met, an insured deposit held by the depositor as trustee for (nominee of) the beneficiary will qualify for CDIC deposit insurance of up to a maximum of $100,000 (principal and interest combined) in respect of the interest of the beneficiary, calculated separately from any insurance in respect of other insured deposits held at the same CDIC member by the securities firm for its own account, or in trust for (as nominee of) any other person or persons, or by the beneficiary in their own name. Again, if the CDIC member in question were to fail, the insurance payment would be made to the securities firm in trust for (as nominee of) the beneficiary.

If a trust deposit is held for more than one beneficiary, the dollar amount or percentage owned by each beneficiary must be identified on the CDIC member's records each year as of April 30. Each beneficiary's share then is insured up to $100,000. 

Jeams Cherestal
CDIC Communications


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## Beaver101

^ Jeams, thank you for your response and explanation of nominees and that bulletin. 

Pertaining to this part,



> As per your scenario, BMO InvestorLine may make a deposit at XYZ Bank, a CDIC member institution, in its own name as nominee for its client “Beaver101”. Acting as a nominee means that the investment dealer holds the deposit in trust for its client. So long as BMO InvestorLine has disclosed to XYZ Bank that it holds a deposit as nominee for “Beaver101”, then *if XYZ Bank were to fail BMO InvestorLine would be the one to receive any CDIC insurance payment and would receive that payment in trust for its client, *“Beaver101”. As stated in the bulletin, most investment dealers arrange for deposits to be issued in their own names as nominees for their clients.
> 
> Where a securities firm makes a deposit in trust for (as nominee of) a client, the securities firm is the depositor of the deposit. The “depositor” of a deposit is the person that has rights against the CDIC member. *Here, the trustee (nominee) depositor is the party with rights against the CDIC member, and so it is the “depositor” for the purposes of CDIC deposit insurance. *The client has rights against the securities firm, not against the CDIC member, and the client thus is not the “depositor”.


 ... my question now is what is the maximum CDIC insurance a nominee (brokerage/securities firm) get for holding multiple deposits at one issuer (XYZ Bank) for one of its client? Multiples of $100K or just $100K in aggregate?


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## Beaver101

It would seems the CDIC spokesperson needed a break from my questions on clarity with respect to deposit insurance for GICS bought at a brokerage so I proceeded to search the CDIC website in depth for the "ultimate" answer (hopefully). 

Here's what is found at the FAQ section pertaining to deposits bought through brokers.



> *How does CDIC calculate insurance for deposits purchased through brokers?*
> CDIC insures eligible deposits at each CDIC member institution up to a maximum of $100,000 (principal and interest combined) per depositor (or, in the case of joint deposits, per set of joint owners), for each of the following:
> 
> a.savings held in one name,
> b.joint deposits (savings held in more than one name),
> c.savings held in trust for another person,
> d.savings held in Registered Retirement Savings Plans (RRSPs),
> e.savings held in Registered Retirement Income Funds (RRIFs),
> f.savings held in Tax-Free Savings Accounts (TFSAs), and
> g.money held for paying realty taxes on mortgaged property.
> To be eligible for deposit insurance, deposits must be payable in Canada, and in Canadian currency. As a general rule, a deposit is considered to be payable in Canada if it is held at a branch or office of a CDIC member institution in Canada.
> 
> Eligible deposits include savings accounts, chequing accounts, GICs or other term deposits with an original term to maturity of 5 years or less, money orders, certified cheques, and bank drafts issued by CDIC members.
> 
> *Some CDIC member institutions retain the services of agents, financial consultants or deposit brokers to sell deposit instruments on their behalf. CDIC’s deposit insurance coverage applies to eligible deposits held by CDIC member institutions, including GICs issued by member institutions, even though they may be purchased through an agent, consultant or broker.*
> 
> *However, it is important to note that agents, financial consultants and deposit brokers are not eligible to be members of CDIC. CDIC’s deposit insurance protection only becomes effective as of the date the funds are received by the member institution.*
> 
> Some deposit brokers may also benefit from the protection of the Canadian Investors Protection Fund (CIPF).


http://www.cdic.ca/DepositInsurance/FAQ/Pages/default.aspx#brokereddeposits


And the following notice has been published on CDIC's website also:



> *NOTICE* Several websites falsely claim that the following entities are CDIC member institutions:
> 
> •One Bank.ca
> •Edgewood Bank of Canada
> 
> These entities are not CDIC member institutions, nor are they regulated by the Office of the Superintendent of Financial Institutions (OSFI).


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## CDIC_SADC

Beaver101,

My apologies for not getting back to you sooner. 

The answer to your question will depend on whether the deposits purchased through a broker at one issuer are held in one or several categories. 

Insured deposits held in each of the categories listed in your last post are insured up to $100,000 at each member institution regardless of how the funds were purchased. 

Jeams Cherestal
CDIC Communications


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## Beaver101

^ No problem Jeams, it's March and we all look forward to a spring break! 

Nevertheless, thank you for all your responses - in particular


> Insured deposits held in each of the categories listed in your last post are insured up to $100,000 at each member institution *regardless of how the funds were purchased*.


 clarifies the answers to the original question.

Cheers,


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## james4beach

Quite amazing service here from the CDIC and its rep, Jeams. I've been learning some new things.

I'm reminded of the rule of thumb to cut out the middle man whenever possible. Holding GICs through brokerages is convenient, but now there's an extra guy in between the CDIC insurance and you. The broker is the one who is paid by insurance. What if the broker becomes insolvent or pulls an "MF Global" in between getting cash from the CDIC and fulfilling their obligation to you?

In periods of high system distress (like frozen credit markets and high counter-party risk), it will be safer to hold a GIC directly with a bank -- no middle man.


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