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Bulletin #0536-M

MFDA Investor Protection Corporation (IPC) – Excess Fund Insurance

Contact: Joni
President, MFDA Investor Protection Corporation
July 27, 2012
Phone: 416-943-5827

Email: [email protected]

MFDA Bulletin

Membership Information

For Distribution to Relevant Parties within your Firm

MFDA Investor Protection Corporation (IPC) – Excess Fund Insurance

In late 2010, the IPC Issues Committee of the MFDA Board recommended “the use of insurance
products as an alternative or additional source of IPC funding.” IPC is pleased to have been able
to implement this recommendation, effective June 1, 2012. IPC has placed $20 million of Fund
Insurance with international insurers. The insurers call the insurance “excess” Fund Insurance, as
the insured (IPC) covers the first layer of claims (losses) and the insurance covers the second
layer. In the event of a large loss, IPC would cover the first $30,000,000 of losses and the
insurance would cover the next $20,000,000 up to a maximum of $50,000,000 of losses. The
policy is subject to its own conditions and limitations.
The insurance coverage is renewable each year and presently has an annual cost of $280,000 plus
applicable taxes.
The insurance policy represents an additional source of funding to IPC and raises the capability
of the fund to absorb losses by $20,000,000 while the policy is in effect. Once IPC has
established a relationship with the insurers, IPC will consider a modification of the assessments
of MFDA Members, likely around the time of the second renewal of the insurance policy. Any
change to the rate of collection of assessments will be subject to the input of the insurers and the
issuer of IPC’s credit facility, as they reference IPC’s cash position in their assessment of the risk
of dealing with IPC.

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