Canadian Securities Course (CSC) Level 1 Practice Exam

Who does the CIPF protect and what does it cover for them?

1. It protects eligible customers in the event of bankruptcy, with coverage up to $500,000.

2. It protects foreign investors

3. It protects eligible customers in the event of the insolvency of an IIROC dealer member, with coverage up to $1,000,000 per account.

4. It protects corporate entities

The correct answer is: It protects eligible customers in the event of the insolvency of an IIROC dealer member, with coverage up to $1,000,000 per account.

The correct response highlights that the Canadian Investor Protection Fund (CIPF) is designed to provide security to eligible customers in the event of the insolvency of an IIROC (Investment Industry Regulatory Organization of Canada) dealer member. This means that if an IIROC dealer becomes unable to meet its obligations, the CIPF steps in to ensure that customers are compensated for their losses. The coverage provided by the CIPF extends up to $1,000,000 per account, which offers a significant level of protection for individual investors and account holders. This assurance is crucial as it instills confidence in the Canadian investment landscape by safeguarding clients' funds and assets against financial failure of brokerage firms. Other options describe scenarios that do not accurately reflect the purpose of the CIPF. For instance, while the notion of protection up to $500,000 is misleading, as the coverage is indeed higher, the mention of foreign investors, and corporate entities fall outside the specific customer eligibility defined by the CIPF. Thus, the focus remains firmly on protecting individual eligible customers in the context of insolvency of participating firms.