CDIC articles and updates

CDIC Introduces the Brokered Deposit Advisory Group (BDAG)

CDIC articles and updates

Brokers at work

Recent amendments to the CDIC Act set out a new framework for how deposit insurance is provided for deposits held “in trust” at CDIC member institutions (MIs), including nominee brokered deposits. This new framework will come into effect on April 30, 2021.

The amendments set out the requirements that nominee brokers and MIs must meet to ensure deposits held for broker clients (i.e. the beneficiaries) are protected. Notably, brokers and member institutions are required to do the following:

Nominee BrokersCDIC MIs
  • Transmit broker’s legal name & address
  • Indicate that deposit is held in trust
  • Provide to the MI – at time a deposit is made or changed – a unique identifier (ID) for each beneficiary to the deposit
  • Use Unique Client Identifier (UCI) for all deposits for that client at an MI
  • Disclose to the MI the beneficial interest for each beneficiary under the deposit
  • Have the capacity to provide CDIC with the unique IDs and related client name and address within 3 business days of CDIC’s request
  • Annually attest to CDIC of having this capacity
  • Receive the required information from the brokers
  • Keep it up-to-date in their systems
  • Provide it to CDIC when required to do so (i.e. through the Data and System Requirements (DSR)
  • Notify brokers of the requirement to provide CDIC with the annual attestation
  • Make required amendments to contracts with brokers to reflect CDIC Act requirements

These requirements are not discretionary: brokers and MIs must apply them by the coming-into-force date (i.e. April 30, 2021) in order to ensure broker clients’ deposits are protected.

In the light of these upcoming changes to brokered deposit protection, CDIC’s Chief Executive Officer Peter Routledge, addressed the 2019 Term Deposit Conference hosted by Cannex. In a speech titled Uniform Product Quality for Deposit Insurance (PDF, 143 KB), Mr. Routledge emphasized the need for industry professionals to understand CDIC’s trust requirements to ensure their clients’ deposits are protected. He also stressed the importance of strengthening cooperation between CDIC and the broker community.

Brokered Deposit Advisory Group (BDAG)

CDIC recognizes that the implementation activities to fully meet these requirements are considerable and will require consistent application by all involved in the brokered deposit process – including brokerage firms, MIs, data service providers and financial exchange platforms – to ensure “upstream to downstream” functionality.

To support strong, cross-industry implementation of the new CDIC Act requirements, we have established a Brokered Deposit Advisory Group (BDAG) to facilitate discussion among industry stakeholders affected by recent changes to the CDIC Act. BDAG has the mandate to:

  • Develop industry-based solutions to ensure a comprehensive implementation of new CDIC Act requirements for nominee brokered deposits
  • Provide industry technical input/advice for various CDIC implementation activities (for example, the development of guidance, industry education materials and the approach to broker compliance)
  • Facilitate communication among stakeholders of viable implementation solutions that meet the legislated requirements and CDIC expectations

BDAG is made up of a roster of some 40+ organizations from across the brokered deposit industry. In May 2019, a BDAG Steering Committee (chaired by CDIC) was struck to assist with identifying and addressing key implementation challenges.

To date some of the key issues identified include: standardizing the approach to establish and allocate unique client IDs; facilitating the transmission of required brokered deposit data from brokers to MIs; and, improving the speed of data transmission where manual processes currently exist.

Over the coming months, several technical working groups will be organized to begin the process of developing viable implementation options and solutions for these and other issues. Once developed, the various approaches developed through the BDAG will be communicated broadly to all industry participants to further promote strong implementation. To learn more about BDAG or to become a member, please contact John Rossi at JRossi@cdic.ca.

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