Canadian Investor Protection Fund An Overview Presentation at

Contents 1 CIPF Protection 2 How Does CIPF fit into the Canadian Regulatory System

CIPF Protection CIPF’s involvement is triggered on member firm insolvency. Member firms are investment

How Does CIPF fit into the Canadian Regulatory System for Investment Dealers? © 2017

Which firms are CIPF Members? A Member Firm is an investment dealer that is

Member Insolvency Part XII Bankruptcy and Insolvency Act (Canada) Customer Name Securities Customer Pool

Fund Size CIPF uses a credit based model to determine the size of the

CIPF Disclosure Policy Introduction Ø IIROC Dealer Member Rule 29. 14 Ø January 1,

Key Differences between Rule 29. 14 and the new CIPF Disclosure Policy Ø CIPF

CIPF’s New Disclosure Policy General Principles Ø Disclose CIPF Membership to clients. Ø No

Examples of misleading and inaccurate disclosure © 2017 CIPF/FCPE 11

Examples of misleading and inaccurate disclosure © 2017 CIPF/FCPE 12

Examples of misleading and inaccurate disclosure © 2017 CIPF/FCPE 13

Research Findings ü For investors, advisors are the key source of information about CIPF

Questions? Ilana Singer Vice-President & Corporate Secretary Tel: (416) 643 -7120 Email: isinger@cipf. ca

Slides: 15

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Contents 1 CIPF Protection 2 How Does CIPF fit into the Canadian Regulatory System for Investment Dealers? 3 Which firms are CIPF Members? 4 Member Insolvency 5 Fund Size 6 Disclosure Policy Examples 7 8 © 2017 CIPF/FCPE Research Findings 2

CIPF Protection CIPF’s involvement is triggered on member firm insolvency. Member firms are investment dealers that are members of IIROC. These investment firms are also automatically members of CIPF covers missing property - this is property held by a member firm on behalf of a client that is not returned to the client following the firm’s insolvency. CIPF does not guarantee the value of the investments, or cover any drop in the value of the investments, even if the investment is in an entity related to the member firm. Currently, there are more than 160 member firms. © 2017 CIPF/FCPE 3

Which firms are CIPF Members? A Member Firm is an investment dealer that is a member of IIROC. A list of member firms is available on the CIPF website. All such IIROC member firms are automatically member firms of CIPF. © 2017 CIPF/FCPE 5

Member Insolvency Part XII Bankruptcy and Insolvency Act (Canada) Customer Name Securities Customer Pool Fund General Fund In a Part XII insolvency, CIPF works with trustee to determine: • Assets available in “customer pool” to distribute to clients • Clients eligible to share in customer pool • Pro rata distribution of customer pool If customer pool not sufficient to satisfy client claims, CIPF will “top up” any clients that are eligible for CIPF coverage but only to the limit of CIPF’s coverage. In insolvency situations where Part XII trustee is not appointed, clients claims are made directly to CIPF. © 2017 CIPF/FCPE 6

Fund Size CIPF uses a credit based model to determine the size of the Fund required to carry out its mandate. KEY INPUTS INTO THE MODEL Probability of Default the risk of a Member failing © 2017 CIPF/FCPE Exposure at Default initial exposure to CIPF Loss Given Default CIPF exposure after recoveries 7

CIPF Disclosure Policy Introduction Ø IIROC Dealer Member Rule 29. 14 Ø January 1, 2017 Ø ² New Dealer Member Rule 29. 28 ² New CIPF Disclosure Policy May 1, 2017 ² © 2017 CIPF/FCPE Further amendments to CIPF Disclosure Policy relating to electronic brochure 8

Key Differences between Rule 29. 14 and the new CIPF Disclosure Policy Ø CIPF Official Brochure Ø Alternate CIPF Explanatory Statement Ø CIPF Membership Symbol Ø General Principles Ø No reference to CIPF risk classification Ø CIPF Membership Symbol optional on written, visual and audio advertising Ø Advance approval from CIPF © 2017 CIPF/FCPE 9

CIPF’s New Disclosure Policy General Principles Ø Disclose CIPF Membership to clients. Ø No false or misleading or deceptive statement about CIPF. Ø Communicate about CIPF Coverage in same language as other client communication. Ø No reference to CIPF allowed on premises or advertising that relates to activities where CIPF protection is not available. Compliance with General Principles Ø Make reasonable efforts to comply with the General Principles. © 2017 CIPF/FCPE 10

Research Findings ü For investors, advisors are the key source of information about CIPF ü Most advisors inform clients about CIPF coverage through a mix of printed materials and verbal conversations ü It is best to inform advisors about CIPF through CE courses and internal firm training ü Advisors prefer that communication about CIPF be made via compliance officers © 2017 CIPF/FCPE 14