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Bulletin #0412-M

Membership Information
MFDA Investor Protection Corporation - Revised Coverage Policy and Brochure (Effective January 1, 2010)

Contact: Joni
Alexander
BULLETIN #0412 – M
IPC President
November 30, 2009
Phone:: (416) 943-5827
Email: jalexander@ipc.mfda.ca

MFDA Bulletin

Membership Information

For Distribution to Relevant Parties within your Firm

MFDA Investor Protection Corporation

The MFDA Investor Protection Corporation (the "MFDA IPC") and the Mutual Fund Dealers
Association of Canada (the "MFDA") are pleased to announce that effective January 1, 2010 the
customer protection coverage by MFDA IPC has been enhanced and clarified. Details of these
improvements are set out in MFDA IPC's Coverage Policy which is attached to this Bulletin and
will be posted on the IPC section of MFDA’s website at www.mfda.ca on the effective date.
Members and customers are encouraged to review the revised document.
In summary, the primary changes to the Coverage Policy relate to:
1.
the circumstances in which a customer is considered to have an account with a Member;
2.
clarification as to the eligibility for coverage for customers who deal with Members in
Quebec (where MFDA IPC does not provide coverage); and
3.
the extension of coverage to losses caused by the insolvency of a Member in respect of
property in the control of the Member including the conversion of such property.
Many other clarifying changes have been made and Members and customers should refer to the
Coverage Policy. No changes have been made to the coverage limits of $1,000,000 for eligible
losses as determined under the Policy and the products covered are the same as in the previous
policy.
A revised IPC Brochure is attached. The IPC Claims Procedures is now available on the IPC
section of MFDA’s website.
As indicated, the changes to the coverage are effective on January 1, 2010 and only apply to
Member insolvencies in respect of which the date of insolvency is determined by MFDA IPC to
be on or after that date.
Doc192914


MFDA INVESTOR PROTECTION CORPORATION
COVERAGE POLICY
MFDA Investor Protection Corporation (IPC) provides coverage to Customers of Members
("Members") of the Mutual Fund Dealers Association of Canada (MFDA) for Losses of Property
in Customer accounts caused by the insolvency of a Member. IPC's objective is to return assets
to Customers or provide compensation for their value as at the date of the insolvency when the
assets are not available from the insolvent Member. This Policy describes who is eligible as a
Customer, the kind of Losses of Property covered, the limits of coverage and how Claims are
determined and made.
The coverage by IPC of Losses suffered by Customers of insolvent Members is in the discretion
of the Board of Directors of IPC. This Policy has been adopted to describe the way in which
such discretion is intended to be exercised. The Directors reserve the right in the appropriate
circumstances to authorize any payments in a manner other than as described in this Policy.
CUSTOMERS
Eligible Customers
A Customer eligible for coverage by IPC is an individual, corporation, partnership,
unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator or
other legal representative who has an account with an insolvent MFDA Member used for
transacting securities business directly with the Member. Such an account is to be fully disclosed
in the records of the Member and is normally evidenced by receipts, contracts and statements
that have been issued by the Member. Accounts with entities other than a Member including a
Member’s affiliates or related organizations are not accounts for this purpose. MFDA maintains
on its website at www.mfda.ca a list of Members whose Customers are entitled to protection
subject to the terms of this Policy.
Persons Excluded as Customers
A Customer does not include:
i)
a domestic or foreign securities or mutual fund dealer registered with a Canadian
securities commission or foreign equivalent;
ii)
any individual or corporation to the extent that such person has a claim for cash or
securities which by contract, agreement, or understanding, or by operation of law, is part
of the capital of the insolvent Member such that the claim represents five percent or more
of any class of equity security of the insolvent Member, or any individual who has a
claim which is subordinated to the claims of any or all creditors of the insolvent Member;
iii)
a general partner or director of the insolvent Member;
January 1, 2010
– 2 –
iv)
a limited partner with a participation of five percent or more in the net assets or net
profits of the insolvent Member;
v)
a person with the power to exercise a controlling influence over the management or
policies of the insolvent Member;
vi)
a clearing corporation;
vii)
a Customer of an institution, securities dealer or other party dealing with a Member on
an omnibus basis (being an account in which the transactions of two or more persons are
combined without disclosure to the Member of the identify of such persons);
viii)
a person who caused or materially contributed to the insolvency of a Member;
ix)
persons who dealt with a Member through accounts used for business financing
purposes; and
x)
persons who do not deal at arm's length (as determined by the Directors) with either an
insolvent Member or a person who is excluded as a Customer.

Quebec
MFDA is not recognized as a self-regulatory organization in the Province of Quebec and
assessments for IPC funding are not made in respect of assets under administration of Members
in Quebec. Accordingly, Customers with accounts in Quebec at MFDA Members, and whose
assets held by MFDA Members in Quebec are not subject to such assessment, will not be entitled
to protection by IPC. Generally, an account is considered to be in Quebec for these purposes if
the office serving the Customer is located in Quebec.
LOSSES
Losses eligible for coverage by IPC must be financial Losses caused by the insolvency of a
Member. These Losses must arise from the failure of the Member to return or account for
Property of the Customer held by or in the control of the insolvent Member including the
conversion of such Property.
Losses which do not result from the insolvency of a Member such as Losses from changing
market values of securities, unsuitable investments or the default of an issuer of securities are not
covered.
– 3 –
PROPERTY COVERED
Types of Property
The Property in a Customer’s account for which IPC coverage is available is restricted to
securities, cash, segregated funds or other property in which a Member is entitled to deal
pursuant to its registration as a dealer under applicable legislation.
Held by Member
Property of a type for which IPC coverage is available is property that is held, or should have
been held, by an insolvent Member for the account of a Customer at the date of insolvency and
which the insolvent Member is obliged to return to the Customer. This kind of Property is
commonly referred to as being in the nominee name of the Member (as opposed to client name
as described below).
Client Name
Property that is not held by the Member, or not recorded in a Customer's account as being held
by a Member, such as mutual fund securities that are registered directly in the name of the
Customer with the mutual fund company or deposits with financial institutions, is not eligible for
IPC coverage even though it was sold through the Member to the Customer. This kind of
Property is commonly referred to as being in client name (as opposed to the nominee name of the
Member) and is not eligible for coverage unless it is otherwise in the custody or control of the
Member. Such custody or control may arise where a Member or its representatives have
ostensible control over assets of a customer holding client name Property by virtue of a power of
attorney, trading authorization or temporary receipt of cash intended to be received by a mutual
fund company or other issuer.
LIMITS OF COVERAGE
Maximum For Each account
The maximum amount of coverage for eligible Property in each of the General and Separate
accounts of a Customer is $1,000,000, subject to the aggregation of such accounts as described
below. The amount of a Customer's claim for Property will be reduced to the extent that the
Customer is entitled to deposit insurance or other compensation from any source in respect of
such Property.
General accounts
Each account of a Customer eligible for protection which is not a Separate account shall be one
of the General accounts of such Customer. All General accounts of a Customer, or any interest
the Customer may have in a General account, shall be combined or aggregated so as to constitute
a single account of such Customer for the purposes of determining the payments to be made to
the Customer. The interest of a Customer in an account which is held on a joint or shared
ownership basis shall be treated as if it were a General account and combined with the General
accounts of the Customer. An account held by a nominee or agent for another person as a
– 4 –
principal or beneficial owner shall, except as otherwise provided in this Policy, be deemed to be
the account of the principal or beneficial owner. For the purposes of determining the maximum
coverage available, the General and Separate accounts that a Customer has with a Member will
not be combined with the General and Separate accounts that the same Customer may have with
another Member, including another Member who has an introducing / carrying agreement with
the first Member.
Separate Accounts
Each account of a Customer held by it in the capacity or circumstance set out below shall be
considered a Separate account of the Customer. Unless otherwise indicated below, each
Separate account held by a Customer in the same capacity or circumstance shall be combined or
aggregated so as to constitute a single Separate account. The burden shall be on the Customer to
establish each capacity or circumstance in which the Customer claims to hold Separate accounts.
An account of a Customer shall not be a Separate account if it existed on the date of insolvency
primarily for the purpose of increasing protection by IPC.
Registered Retirement Plans: accounts of registered retirement or deferred income plans such
as registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), life
income funds (LIFs), locked-in retirement accounts or plans (LIRAs or LIRSPs) and locked-in
retirement income funds (LRIFs) established for the account of a customer (excluding spousal
plans) which comply with the requirements under the Income Tax Act (Canada) for such plans
and which have been accepted by the Minister under such Act, where the customer is entitled to
the benefits of the plan. Accounts established with respect to a customer through the same or
different trustees shall be combined and aggregated.

Registered Education Savings Plans: accounts of education savings plans which comply with
the requirements under the Income Tax Act (Canada) for registered education savings plans and
which have been accepted by the Minister under such Act, where the customer is the subscriber
of the plan. Accounts established with respect to a customer through the same trustee shall be
combined and aggregated by trustee, but not if established through different trustees.

Testamentary Trusts: accounts held in the name of a decedent, his or her estate or the executor
or administrator of the estate of the decedent. Accounts of testamentary trusts held by the same
executor or administrator shall not be combined or aggregated unless held in respect of the
same decedent.

Inter-vivos Trusts and Trusts Imposed by Law: accounts of inter-vivos trusts which are created
by a written instrument and trusts imposed by law. Such Separate accounts of customers shall
be distinct from the trustee, the settlor or any beneficiary.

Guardians, Custodians, Conservators, Committees, etc.: accounts maintained by a person as a
guardian, custodian, conservator, committee or similar capacity in respect of which accounts
such person has no beneficial interest. Such accounts held by the same person in any such
capacity shall not be combined or aggregated unless held in respect of the same beneficial
owner.

– 5 –
Holding Corporation: accounts of corporations controlled by a customer provided that the
beneficial ownership of a majority of the equity capital of the corporation is held by persons
other than the customer.

Partnerships: accounts of partnerships controlled by a customer provided that the beneficial
ownership of a majority of the equity interests in the partnership is held by persons other than
the customer.

Unincorporated Associations or Organizations: accounts of unincorporated associations or
organizations controlled by a customer provided that the beneficial ownership in a majority of
the assets of the association or organization is held by persons other than the customer.

Timing of Payments
The time of payment of the maximum amount of coverage in respect of an account as described
above may be affected by the amount of assets immediately available to IPC in the event of the
insolvency of a Member. While IPC has the legal ability to assess Members for contributions to
an unlimited amount or draw on lines of credit, IPC may not have on hand at any time sufficient
assets to make immediate payment of the maximum amount of coverage available to Customers
on the insolvency of a Member.
CLAIMS
Claims and Determination of Customer Losses
The Claim of a Loss of a Customer in respect of which the Directors may authorize payment by
IPC shall be determined as at the applicable date of insolvency (as fixed by the Board of
Directors) after taking into account the delivery of any securities or property to which the
Customer is entitled and the distribution of any assets of the insolvent Member. Accordingly,
the maximum amount of securities, cash and other property which MFDA IPC may pay to a
Customer shall be calculated as the balance of the Customer's financial Loss as a result of the
insolvency of the Member net of such deliveries or payments. To be eligible for coverage, the
Claim by any Customer must be filed with IPC or the trustee in bankruptcy or similar official of
the insolvent Member within 180 days of the date of insolvency.
Date of Loss
The date at which the financial Loss of a Customer is determined shall be fixed by the Directors
as the date of insolvency of the Member, which may be the date of the Member's bankruptcy, or
the date on which, in the opinion of the Directors, the Member became insolvent. The amount of
Property delivered to a Customer in satisfaction of a Claim shall be the amount of Property to
which the Customer was entitled as at such date for determining financial loss without regard to
subsequent market fluctuations. In lieu of satisfying a Claim by the delivery of Property, cash in
an amount equal to the value of the Property as at the date for determining financial Loss may be
paid to the Customer even though the amount of such cash is not equal to the value of such
Property as at the date of payment. Open positions in a Customer's account may, with or without
notice, be closed out or liquidated pursuant to the terms of the account with the Member or
– 6 –
correspondent broker, clearing house or exchange requirements or applicable insolvency
legislation or orders.
Insolvency Legislation
The determination of the amount of financial Loss suffered by a Customer of an insolvent
Member for the purposes of payment by IPC and the maximum limits of such payments shall be
in accordance with this Policy. In addition, the Directors may exercise their discretion, in respect
of determining Customers eligible for protection and the amount of financial Loss suffered, in a
manner that is consistent with the right and extent to which a person may be entitled to claim
against the customer pool fund of a Member under the Bankruptcy and Insolvency Act (Canada),
subject to other restrictions in this Policy and the sole discretion of the Directors to determine
protection by IPC. The Directors may rely on the trustee in bankruptcy or the receiver under
applicable law in determining the amount and validity of Claims of a Customer and for the
purpose of calculating financial Loss.
Determination by Directors Conclusive
In the case of any question or dispute as to the interpretation or application of this Policy,
including, without limitation, eligibility of the Customer, the amount of the financial Loss
incurred by a Customer for the purposes of payment by IPC of a Claim and the maximum
amounts to be paid to a Customer, the interpretation of the Directors of this Policy shall be final
and conclusive.

Doc193518
January 1, 2010

MFDA INVESTOR PROTECTION CORPORATION
Sponsored by the

Mutual Fund Dealers Association of Canada



INVESTOR PROTECTION FOR MUTUAL FUND DEALER BANKRUPTCY

The following is a general description of the coverage provided by the MFDA Investor Protection
Corporation. Full details of coverage and how customer claims are handled are available in our
policies and procedures on our web site at www.mfda.ca or call us at 416-361-6332 or toll free at 1-
888-466-6332
.

About the MFDA Investor Protection

Corporation (IPC)

Each of your non-registered accounts held at the
IPC exists to provide compensation to you if
insolvent firm will be aggregated as one general
your assets are unavailable because your mutual
account to the extent that the accounts are held
fund dealer becomes bankrupt. The IPC is
in the same capacity and circumstances.
sponsored by the Mutual Fund Dealers

Association of Canada (MFDA) and coverage is
Some accounts at the insolvent firm are
automatic when you become a customer of a
considered separate accounts. These include
MFDA Member. There are no fees to you, the
registered retirement plan accounts such as
investor.
RRSPs, RRIFs, LIRAs, etc. which will be

combined into one separate account for

coverage purposes.
Amount of coverage

Coverage is in the amount of up to $1 million
Losses not covered
per customer account in respect of the loss of

customer property held by a MFDA Member.
The IPC covers losses arising as a result of the
Most customers will have two “accounts” for
insolvency of a MFDA Member. Losses caused
coverage purposes, a general account and a
by other reasons such as the change in the
separate account (see covered assets and
market value of mutual fund securities,
accounts below), that are each eligible for up to
unsuitable investments or default of an issuer
$1 million coverage.
of a security are not covered.

Customer assets not held by the MFDA
Covered assets and accounts
Member, or not recorded in a customer's

account as being held by a MFDA Member
IPC protection extends, within its limits, to cash,
(such as mutual fund securities that are
securities, segregated funds and certain other
registered directly in your name with the mutual
property held by a MFDA Member. Customers
fund company) are not eligible for IPC
with accounts in Quebec are not covered by
coverage, unless the asset is otherwise in the
IPC.
custody or control of the Member.
Page 1 of 2

Transfer of assets
consultation with the MFDA. The principle is

that MFDA Members are to be collectively
In some cases in the event of your MFDA
responsible for the payments of client losses
Member’s insolvency, your assets will be
arising as a result of the insolvency of a MFDA
transferred to another securities firm or MFDA
Member.
Member. This permits continued access to your

account holdings without having to claim them
If a Member’s insolvency depletes the cash of
in an insolvency.
the IPC, the IPC will call on the Members for

additional funds. This situation may result in
payments made to customers over time, as
Making a claim
assessments are collected.

Claims of a customer of an insolvent MFDA

Member should be made directly to the trustee

in bankruptcy or the receiver, if one has been

appointed. The IPC may rely on the trustee in

bankruptcy under the Bankruptcy and
Additional information can be obtained by
Insolvency Act (Canada) or on the receiver
contacting the MFDA IPC at:
under applicable law in determining the amount

and eligibility of your claim. You must file a
MFDA Investor Protection Corporation
proof of claim within 180 days of the date of
c/o Mutual Fund Dealers Association of
bankruptcy or insolvency or by the date
Canada
established by the receiver or trustee.

Guarding against insolvencies

121 King Street West
Mutual fund dealer bankruptcy is a rare
Suite 1000
occurrence. The IPC relies on the adequacy of
Toronto, Ontario
the MFDA' s prudential regulation. The MFDA
M5H 3T9
has experience in identifying certain conditions
Tel: 416-361-6332
or activities that may indicate financial
Toll Free: 1-888-466-6332
difficulties and carries out this monitoring on a
Fax: 416-361-9781
continuous basis.

Email: ipc@mfda.ca

Where this protection comes from
Website: www.mfda.ca

The IPC maintains a fund to which each MFDA

Member contributes. The IPC assesses each

Member according to certain criteria and in

Doc102659v3
January
1,
2010

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