Stockbrokerage protection doubles
By
TRACY LEMAY
The Financial Post
TORONTO - The huge increase in the participation by Canadians in securities markets has led to a doubling of the amount of protection against investment dealer insolvency.
The Canadian Investor Protection Fund announced yesterday it has doubled current coverage limits to a maximum of $1-million and is removing the $60,000 limit on cash balances held by customers. The changes took effect yesterday. The previous limit was $500,000, including the maximum $60,000 limit for cash balances.
The higher limits not only gives investors greater protection, but also removes the need that some may have felt to move cash around to ensure that it was covered under the former limits, says CIPF chairman Michael Tims.
The CIPF, which is sponsored by stock exchanges and investment dealers, says Canadian investors' holdings in securities have doubled to more that $550-billion over the last 10 years.
"Ten years ago, 22% of the average investor's financial assets ... were stocks. Today this share has grown 30% and the absolute value has more than doubled," the CIPF said in a press release.
The fund covers investor losses of securities and cash balances resulting from the insolvency of a CIPF member firm. But it does not cover losses springing from other causes such as changing market conditions or simply picking the wrong company.
Coverage of separate accounts -- those that CIPF members treat as if they belong to a separate customer -- has also been amended.
All registered retirement accounts of a customer, including registered retirement savings plans, registered retirement income funds, life income funds, locked-in retirement accounts or plans and locked-in retirement income funds are to be combined and treated as a single separate account.
Previously, these special accounts were covered individually.
Also, a customer's proportionate interest in a joint account will be combined in his or her general account, CIPF says. The joint account will no longer be covered as a separate account.
The fund is financed by assessments of major firms based on their revenues. Mr Tims says the increased coverage will not result in any additional industry assessments.
Currently the fund has assets of $160-million and access to a $100-million line of credit. It also has the ability to assess up to 1% of the revenues of member firms.
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