On April 30, 2022, several changes to the CDIC Act and By-laws took effect. These changes introduced a new framework for how deposit insurance is provided for deposits held “in trust” at CDIC member institutions (MIs). These changes affect deposits held by brokers in nominee name for their clients (Nominee Broker Deposits).
The new framework sets out the requirements that nominee brokers must meet to the ensure deposits they hold for their clients (i.e., the beneficiaries) remain protected by CDIC. The requirements that nominee brokers must meet include the following:
- Assign a unique client identifier (UCI) to each client for whom they place deposits in nominee name at a CDIC MI. (The same UCI must be transmitted for the same client, irrespective of the number of deposits that a client might hold at a CDIC MI.)
- Transmit to the MI a unique client identifier at the time they place a deposit for a client and each time a change is made to a deposit
- Disclose to the MI the beneficial interest for each client beneficiary under the deposit
- Have the capacity to provide CDIC with the UCIs & related client names and addresses within 3 business-days of CDIC requesting this information
- Attest annually to CDIC that a broker has the capacity to do the above noted actions
It is critical for all nominee brokers to be aware of the following:
- The requirements are not discretionary, and they must be applied by all nominee brokers to ensure their clients’ deposits are protected
- The requirements apply to all deposits already placed with a CDIC MI at the date the new rules take effect (existing deposits) and all deposits placed subsequent to that date
- The new rules will impact current processes and systems across the nominee brokered deposit industry
- Implementation activities require consistent application by all involved in the brokered deposit process
As a result of significant industry engagements through the Brokered Deposit Advisory Group (BDAG), the Nominee Broker Deposit industry (brokers, member institutions, financial exchange platforms, data service providers, etc.) should be well advanced in its work to implement and execute the requirements set out in the CDIC Act as of April 30, 2022.
To further assist the nominee brokered industry in understanding and implementing the new deposit insurance requirements , and to support strong compliance with the legislation, CDIC has developed the following downloadable presentation which provides an overview of the legislative amendments, and maps the new requirements to several key industry best practices and supporting documentation developed by BDAG.
It is strongly recommended that all brokers download the presentation and review it in conjunction with the BDAG best practices documentation which can be found here: Industry Best Practices (Brokered Deposit Advisory Group – BDAG).