When a Member is Insolvent

If your member firm has failed, it is important that you get answers to your questions, and know how you are protected. Below are some frequently asked questions and responses you may find useful. Click on the question for more information.

1. When is a member firm considered insolvent?

For purposes of CIPF coverage, a member firm is generally considered insolvent on the date that a court appoints a trustee in bankruptcy, receiver, liquidator or other insolvency official for the member firm. If such an official is not appointed, CIPF generally considers a member firm to be insolvent on the date clients no longer have unrestricted access to their accounts. For example, this may occur if the member firm is suspended by the Canadian Investment Regulatory Organization (CIRO), the national self-regulatory organization for all investment dealers and mutual fund dealers in Canada.

2. Who should I contact for information about my account?

In most cases, the court will appoint an insolvency official to administer the affairs of an insolvent member firm. You should contact the trustee in bankruptcy or another insolvency official who has been appointed by a court to administer the insolvent firm. A trustee in bankruptcy is a person or corporation licensed by the Office of the Superintendent of Bankruptcy Canada to administer bankruptcy proceedings. More information can be obtained on the Government of Canada website at www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/home.

If your member firm is insolvent and you don’t know who the insolvency official is, you may contact Canadian Investment Regulatory Organization (CIRO), the organization that regulates investment dealers and mutual fund dealers in Canada.

3. What is CIPF's role?

CIPF provides limited protection for property held by a member firm on behalf of an eligible client if the member firm becomes insolvent. If you have an account with a member firm and that firm becomes insolvent, CIPF works to ensure that any property being held for you by the firm at that time is returned to you, within certain limits. Client property can include securities and cash. However, CIPF does not guarantee the value of your property. Find out more about what CIPF does and does not cover here.

CIPF's role may include, in certain circumstances, requesting the appointment of a trustee in bankruptcy.

4. I have received correspondence from the trustee in bankruptcy/receiver about my account. How was this official selected to administer the member firm?

The appointment may be done at the request of the insolvent firm itself, certain creditors of the insolvent firm, or others. In certain circumstances, the appointment can be made at the request of CIPF. Depending on the circumstances of the insolvency, an insolvency official may be a trustee in bankruptcy, a receiver, a liquidator, a monitor, or other court-appointed official.

5. Will the property in my account be returned to me?

When an insolvency of a member firm occurs, CIPF works with the trustee in bankruptcy (if one is appointed) with the objective of returning any property that was being held for clients by the member firm at the date of its insolvency as quickly as possible. Since the insolvent firm can no longer carry on the function of holding property for its clients, it is generally necessary to transfer this function to another firm. As a result, client accounts may be moved to another member firm so that clients can access their accounts.

If a trustee in bankruptcy is appointed by a court, this trustee will typically be responsible for transferring client accounts to another solvent firm. If an insolvency official other than a trustee in bankruptcy is appointed by a court, this official will often be given the responsibility of transferring client accounts to another solvent firm.

CIPF protection will apply if the property being held on a client's behalf is not available to be returned to the client. Certain limitations apply. Please see What Does CIPF Cover? for more information on what is covered and not covered.

6. How can I make a claim to CIPF?

The information required to make a claim to CIPF is available from the CIPF website, or upon request to CIPF.

You must submit a proof of claim to CIPF within 180 days of the date of insolvency along with all documents and information to support the claim. If a trustee in bankruptcy is appointed by a court to manage the affairs of the member firm where you have an account, you may submit your claim form along with the supporting documentation to the trustee in bankruptcy, instead of CIPF. If no trustee in bankruptcy is appointed, the claim can generally be made directly to CIPF.

For more information, please refer to the CIPF Claims Procedures.

7. My account statement from my member firm shows that the securities in my account are held in segregation. What does segregation mean?

For member firms regulated by Canadian Investment Regulatory Organization (CIRO), there is a segregation requirement to help minimize the risk of client property being missing if a dealer fails. The segregation rules require dealers to separate clients's fully paid securities from the firm's own assets and investments, so that client's securities are not used by the dealer in the conduct of its business.

However, segregation is not required for all client property. For example, investment dealers are generally permitted to use the cash in the client's accounts. Therefore, there may still be some client property missing, even with segregation rules.

8. For securities that are held in segregation, will those securities be returned to me?

Not necessarily. For those securities that are segregated, it is possible that those securities will not be available to be returned to you if the broker becomes insolvent. The particular circumstances of insolvencies can vary widely. For example, one of the laws that may apply to an insolvency of an investment dealer or mutual fund dealer in Canada is Part XII of the Bankruptcy and Insolvency Act (Canada). If Part XII applies, all client cash and securities held by the insolvent firm for its clients at the time of bankruptcy, other than customer name securities (registered in the customer's name), would be included in a single "customer pool". Any "shortfall" of client cash or securities would be allocated proportionately from the customer pool across all clients after payment of bankruptcy administration costs.

9. What is Part XII of the BIA?

Part XII of the Bankruptcy and Insolvency Act (BIA) is a special section of the BIA introduced in 1997. This section gives clients of a bankrupt firm clear priority over general creditors through the concept of the customer pool fund. Under Part XII, CIPF is given the status of a customer compensation body that can apply to the court for a bankruptcy order against a member firm if that member becomes insolvent.

Providing you with the answers you need and learning about the steps that can be taken in the event of an insolvency is our priority. Below, you will find a list of the initial steps that you may wish to consider taking if your firm fails.

Getting Started

1. Check that your account is with a CIPF member firm. You may find the list of CIPF member firms here.

2. Locate and review your most recent account statement.

3. Identify any recent changes in your holdings that are not reflected on your last account statement, or any discrepancies on the account statement. If there are any recent changes or discrepancies, locate any back-up documentation (for example, directions to your broker to purchase or sell, trade confirmations from the last 30 days).

Finding Out the Status of Your Account

4. A trustee/receiver/other official is typically appointed by a court to administer the failed member firm. If this official has contacted you, skip to step 6.

5. If you do not know which insolvency official has been appointed to administer the failed member firm, contact Canadian Investment Regulatory Organization (CIRO) (the regulator of investment dealers and mutual fund dealers in Canada). You can also check the CIPF website for information. As soon as CIPF becomes aware of this information, we do our best to post it quickly.

6. Review all communication you receive from the insolvency official.

7. Contact the insolvency official to get answers to any questions you have about your account.

Transferring Your Account to a Solvent Firm

8. Since an insolvent firm cannot service your account, your account will need to be transferred to a solvent firm. If your account has been transferred by the insolvency official to a solvent firm, information about the transfer will be communicated to you by the insolvency official. In our experience, you are normally given the choice of where to move your account. In some cases though, the insolvency official may tell you after the transfer has occurred.

9. Check that all the securities and cash (and any other property) that were in your account at the date of the member firm’s insolvency have been transferred to a new firm for you.

10. If you did not select the firm where your account was transferred, consider if you now want to transfer your account to another firm of your choice. If so, make arrangements with your new firm to request a transfer. (Note: Some securities may not be transferable to the new firm).

11. If you had securities or cash (or other property) in your account that have not been returned to you, or transferred to a new account for you, consider filing a claim with CIPF.

12. Review the CIPF website for information about what is covered and not covered by CIPF, the deadline to file a claim, the form to use, and general information about CIPF coverage.

Insolvency Official - generally, a trustee in bankruptcy or receiver appointed by a court to take over the administration of the insolvent member firm.

Canadian Investment Regulatory Organization (CIRO)- regulates and enforces rules for investment dealers and mutual fund dealers (member firms) in Canada.

Canadian Investor Protection Fund (CIPF) - works to ensure that property being held for you by a member firm at the time of its insolvency is given back to you, within certain limits. CIPF does not guarantee or protect the value of a security.

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