Protection Mechanisms for Your Savings

We are always grateful for the confidence you show us by entrusting us with your financial assets. Besides this confidence, what are your means of protection?

Demers Valeurs mobilières inc. offers you three levels of protection, effective as soon as your account is opened. 

Level One: Financial Institution Insurance

All investment dealers must subscribe to an insurance protection called Financial Institution Insurance. This insurance policy covers the dealer and its clients against the following risks: embezzlement, loss of money and securities following a theft or burglary, forgery of cheques and other notes payable, and losses undergone following the purchase or sale of falsified, forged, lost or stolen securities.

Level Two: Canadian Investor Protection Fund 

The CIPF is a protection fund which was established by the investment industry to ensure the return of securities and cash balances in case the investment dealer is unable to proceed because it is bankrupt. This protection is similar to the deposit insurance offered by banks.

The protection is $1,000,000 CA for any combination of cash and securities. This coverage is automatic when you open an account with an investment dealer and there is no additional cost to be covered by the CIPF. 

The CIPF protects the clients of members against losses resulting from the bankruptcy of a member and not against losses resulting from market fluctuations or losses caused by the bankruptcy of the issuer of a security or deposit instrument held in your account, irrelevant of how big or small.

The total value of securities belonging to clients held by investment dealers exceeds 800 billion dollars. Since 1969, the losses, after deducting the amounts recovered, amount to only 37 million dollars and were all covered by the CIPF. 

Level Three: AIG

Of its own will, Demers Valeurs mobilières inc. subscribes a private insurance policy, through its financial service provider, known as the CIPF Excess Coverage. This additional protection gives our clients a coverage over and above the limit offered under the CIPF coverage. This insurance extends your coverage to $11,000,000 per account.

Other Measures

When you buy shares and bonds, the certificates are issued separately and kept exclusively in your name. You can confirm whether your securities are separate by examining your statement of account under the section securities in custody.

The monthly financial statements of investment dealers are examined by both provincial and federal financial regulating authorities. 

The annual financial statements of investment dealers must be audited by chartered accountants trained and approved by the financial regulating authorities. The audit files are reviewed by the financial regulating authorities. 

Finally, the regulating authorities proceed with two additional annual inspections. One concerns the financial aspect and the other compliance (for example: whether the client’s objectives are respected).

The Type of Dealer

An investment dealer that suggests a product little known by the general public with a return that does not seem reasonable considering its nature, can put at risk the safety of your entire portfolio as well as the safety of the firm.

When structures are not well defined, it leaves room for certain forms of abuse, as we were able to observe recently. It is therefore preferable to invest in known products, easy to exchange and easy to track down in financial pages.

Stéphan Morin, CA
September 2005

Stéphan Morin is a Chartered Accountant and an investment adviser. He specializes in the management of financial assets and focuses on investment strategies to increase the return in a safe manner.
Protection Mechanisms for Your Savings