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Email this11:37 pm
October 21, 2013
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So, do we know if WS discloses the beneficiaries of its trust accounts to CDIC or to the banks in question? If they do, how could we be sure and why can't they tell us too?
If RBC or whichever bank only has to insure 100,000 out of a billion, there will be an increased profit margin for them.
5:00 am
April 27, 2017
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- They won’t tell us because its none of our business (and most of us don’t care). The auditors will know.
- RBC or whichever bank has to insure the exact same amount. Assuming WS clients keep cash balance under $500K, hypothetical “RBC” has to insure 100% of it under CDIC.
6:04 am
September 11, 2013
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The formal trusts I'm involved with regularly are asked to update the list of disclosed beneficiaries by the institutions where the trusts have accounts, exactly for the purpose of CDIC coverage per beneficiary. (I usually ignore the requests as CDIC coverage is not an issue with those trusts.)
7:25 am
April 6, 2013
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It is not part of the account agreement. But, Wealthsimple says the necessary beneficiary information is disclosed to the banks in their response to a question in Understand how CDIC coverage works in your Cash account:
How are my funds split between the partner banks that you are using?
The funds are split to maximize your eligible CDIC coverage.
Note: We work with several tier-1, CDIC-member, regulated Canadian financial institutions to hold your deposits in trust. CDIC’s coverage limit applies separately to each deposit category at each member institution, so even if you bank with our bank partners, you’ll have CDIC coverage in both places. We provide our banking partners with the relevant reporting information concerning beneficiaries in line with our CDIC reporting obligations. Beneficiary information is based on account holder information so please make sure your information is up to date. You can learn more about how CDIC coverage works on their website.
Wealthsimple also says that there would be no overlap with the CDIC coverage of accounts a Wealthsimple Cash Account holder may directly have with the same banks. That's consistent with those trust accounts being in Wealthsimple Payments Inc.'s name and not in the name of any of the Wealthsimple Cash Account holders.
No way for Wealthsimple Cash Account holders to verify on their own. Even if the bank were known, a disclosed beneficiary of a bank account is not entitled to info about the bank account from the bank. The beneficiary needs to go through the trustee who is the bank account's holder.
7:56 am
April 27, 2017
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WS should be well positioned to rip the benefits of Open Banking… I assume.
https://www.theglobeandmail.com/business/article-what-is-open-banking-canada/
11:15 am
September 18, 2023
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Resurrecting this for two points:
1) Per earlier requests in this thread, we now have an example of what happens when a non-bank intermediary (NBI) goes bankrupt due to the recent lockup of FDIC-insured accounts for Americans due to the bankruptcy of Synapse.
- Synapse is a fintech that acts as an NBI for other client-facing NBI (CF-NBI) apps to connect these apps with an actual deposit-taking institution.
- Since the deposit-taking institutions are FDIC insured, the CF-NBI correctly asserts that there is FDIC coverage on deposits in the event that the deposit-taking institution fails.
- Due to Synapse entering bankruptcy, over 100,000 depositors and $265 million in deposits have been inaccessible since May 11th.
- FDIC will not pay out as the FDIC-insured institution has not failed.
- Bankruptcy laws appear to be preventing customers from getting access to their deposits.
2) Wealthsimple mentions holding client funds in trust with "tier-1" banks in their FAQ, but there is no such thing as a "tier-1" bank in Canada.
- As of December 31, 2023, Canada has 35 Schedule 1 banks; it is possible Wealthsimple is holding the funds in one of these banks.
- However, given the otherwise careful wording of the FAQ, it seems odd they wouldn't say "Schedule 1" if that is what they meant.
- As "tier-1" has no defined meaning in Canadian law, and Wealthsimple has not disclosed what banks they use, the only fact customers can know from the Wealthsimple FAQ about where their money is held is that deposits are banked at any of the 86 CDIC member institutions ("Total number of institutions," CDIC annual report for 2023, Page 4).
1:20 pm
August 4, 2010
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I think you are being a little too conspiratorial on the "tier-1" thing. I'm sure they just mean "Schedule 1" banks, and a Power Corp company with billions of dollars in assets under management isn't trying to do a weasel words thing there! Furthermore, I think it is highly likely that the banks involved are the same ones interested in providing bulk deposits to the cash ETFs - Scotia, National, BMO, CIBC probably - they used to have 3/$300,000, and it looks like a couple others are now in the pool.
For the Synapse thing, it looks like the problem there is that Synapse was acting as an actual middleman between banks and the customer-facing companies (CFC), and did all the work of splitting the money to various FDIC banks, and doing all the ledger bookkeeping involved in that. It looks like they were almost criminally sloppy, if the relationships back to the originating CFC and their customers can't be unravelled.
For Wealthsimple, it is likely that they are doing this middleman layer to the CDIC banks themselves? They are big, and I don't know if there would be an equivalent Banking-as-a-Service company in Canada suitable for them to use? (The prepaid card portion only is done through Koho). Even with Synapse, presumably all the money is distributed out somewhere (unless actual criminality is involved), but the details are buried in Synapse systems. I'm not especially worried that Wealthsimple Payments/Investments are going to shut themselves off.
7:04 pm
April 6, 2013
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According to the Chapter 11 trustee's latest report, looks like there's going to be a shortfall of at least $65 million in the bank accounts:
… As of the time of this [Chapter 11 trustee’s status third] Report, the shortfall estimate continues to be in the range of $65 – $96 million. The range in estimated shortfall is due to there being held at certain Partner Banks approximately $31 million in Synapse-related funds from interest and rebate payments; however, further reconciliation efforts must be completed to determine the extent to which these funds belong to end users.
That sounds like more than sloppy bookkeeping.
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