Allocation of Losses to Customers

CIPF's coverage is determined after all available assets of the insolvent Member are returned to customers by a trustee/receiver. For bankruptcies of a Member administered under Part XII of the Bankruptcy and Insolvency Act (Canada), the process of returning all available assets of the Member to customers is generally done by a trustee using the 4-steps outlined below.

  1. At the date of insolvency, CIPF or the trustee/receiver will determine the TOTAL CLIENT NET EQUITY, and the size of the CUSTOMER POOL.

    TOTAL CLIENT NET EQUITY     and    CUSTOMER POOL

  2. CIPF/trustee will then determine EITHER:

    TOTAL CLIENT NET EQUITY is less than CUSTOMER POOL

                                                                     OR

    TOTAL CLIENT EQUITY is greater than CUSTOMER POOL

  3. CIPF/trustee will calculate the SHORTFALL, if there is one, as:
    SHORTFALL = TOTAL CLIENT EQUITY less CUSTOMER POOL
  4. CIPF/trustee will allocate the SHORTFALL to each customer in proportion to their claim for net equity.

    HERE IS AN EXAMPLE:
    CIPF/trustee determines the following:
    TOTAL CLIENT NET EQUITY $2.0 BILLION
    CUSTOMER POOL $1.9 BILLION
    SHORTFALL $100 MILLION or 5% (100 million / $2 billion)

    CLIENT 1 HAS CLIENT NET EQUITY OF $2 MILLION:
    LOSS ALLOCATED = $100,000 (5% OF $2 MILLION)
    CIPF COVERAGE = $1 MILLION
    LOSS TO CUSTOMER = NIL

    CLIENT 2 HAS CLIENT NET EQUITY OF $20 MILLION:
    LOSS ALLOCATED = $1,000,000 (5% OF $20 MILLION)
    CIPF COVERAGE = $1 MILLION
    LOSS TO CUSTOMER = NIL

    As you can see in this example, unless a customer's client net equity exceeds $20 million, there will likely be no loss.

    This example is for illustrative purposes and each insolvency can produce different results. In most insolvencies, clients who are eligible for CIPF coverage will find that the $1 million limit of coverage is sufficient to protect their assets, as of the date of insolvency.

  5. For more information, please refer to the CIPF Coverage Policy.