I am aware that investments held by a brokerage firm are covered up to $1-million by the Canadian Investor Protection Fund in the event of a bankruptcy. Recently, our account has gone considerably over this amount and I am concerned that if the brokerage does go bankrupt we could lose everything over the $1-million threshold. Should we transfer some of our securities to a different brokerage company? If so, what would the tax consequences be? Would we be considered to have sold the shares on transfer and have to claim the capital gains at that time?
I don’t think it’s necessary to transfer any assets. Before I explain why, some background is in order.
The Canadian Investor Protection Fund (CIPF) is funded by investment dealers that belong to the Investment Industry Regulatory Organization of Canada, ranging from the big, bank-owned brokers to small, independent firms. (View a list of CIPF’s members here. by going to CIPF.ca and clicking on “member directory.”) In the event that a firm becomes insolvent, CIPF will cover up to $1-million in cash, stocks, bonds or other assets that are missing from a client’s account.
The dollar limit applies to each of several different account categories at the same financial institution – namely, $1-million for all non-registered accounts and tax-free savings accounts combined, $1-million for all registered retirement accounts and $1-million for all registered education savings plans. If you have accounts at other financial institutions, they receive their own coverage up to the same $1-million limits.
Now, before you move any assets around, it’s important to understand a couple of things. First, insolvencies of investment dealers are rare. Second, even if your firm were to go bankrupt, it’s likely that only a small portion – if any – of the firm’s assets would be lost. Once the bankruptcy trustee has distributed all of the available assets to clients, the odds of a single customer being out by more than the covered $1-million are vanishingly small.
In the past 25 years, there have been just eight CIPF member insolvencies. The total payout, net of recoveries, in those eight cases averaged just $2.27-million, Jane Yoo, a senior adviser with CIPF, said in an e-mail. To be clear, that’s the average combined payout to all customers of the insolvent firm; the payout to each individual client would have been a small fraction of that number – far under the $1-million limit.
What’s more, it sounds like you have a joint account with a spouse, in which case you would each qualify for $1-million of CIPF protection, or $2-million in total. So there’s even less reason to worry.
The bottom line is that you have a great deal of protection for an extremely unlikely event that, even if it were to happen, would almost certainly not leave you out of pocket. So I see no reason to move a portion of your assets to a different broker. Moreover, doing so would entail a lot of paperwork – brokers love paperwork – and add another layer of complexity to managing your assets.
Now, in some cases it may make sense to move assets. Perhaps you don’t like the service at your current broker; or you already have two brokers and you want to consolidate your accounts under one roof for simplicity; or you want to take advantage of a cash incentive a broker is offering to move your assets. As for the tax consequences, transferring non-registered securities from one broker to another is not considered a deemed disposition, so no capital gains taxes would apply in such cases.
Capital gains taxes do come into play, however, if you do an in-kind transfer of assets with unrealized gains from a non-registered account to a registered account such as an RRSP or TFSA.
As a retiree, I depend on monthly distributions for retirement income. I own the iShares Canadian Select Dividend Index ETF (XDV), which has more than half of its assets in financials. But even as banks and insurers have been raising their dividends, XDV recently cut its distribution by about 10 per cent. Is iShares not passing along all the bank dividend increases received XDV?
Nothing nefarious is going on here.
It’s normal for an exchange-traded fund’s distribution to fluctuate from month to month, or quarter to quarter. This reflects factors such as the timing of dividends from the ETF’s underlying securities, changes in the ETF’s constituents, increases or decreases in their dividend rates and the flow of investor funds into or out of the ETF.
Unless stocks in the ETF have cut their dividends, or the ETF’s composition has changed dramatically, any decline in its distribution is likely to be temporary.
In the case of XDV, it must have been disconcerting to see the distribution fall to 9.3 cents a unit in April, down from 10.3 cents in each of the three previous months. But here’s good news: This week, BlackRock Canada announced that XDV’s distribution will rise to 10 cents a unit for the cash payment on July 29.
It’s important not to lose sight of the big picture. Even as XDV’s distribution has bounced around from month to month, the long-term trend is still up. In 2017, XDV’s monthly cash distribution averaged about 7.95 cents a unit. So far in 2022, it’s averaged 9.19 cents. So the distribution is moving in the right direction.
E-mail your questions tojheinzl@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
