The Mutual Fund Dealers Association of Canada Investor Protection Corporation is in the process of negotiating a $30 million line of credit, and expects to start coverage July 1.

The MFDA IPC notes that on May 3, the Ontario, Alberta, BC and Nova Scotia Securities Commissions and the Saskatchewan Financial Services Commission approved it as a compensation fund for customers of mutual fund dealers that are members of the MFDA.

The initial size of the IPC has been set at $30 million. The board of directors of the MFDA approved the transfer of $2.5 million from the MFDA’s discretionary fund to the IPC. The discretionary fund is an account established by the MFDA to receive fines and penalties collected from MFDA disciplinary proceedings. In addition, the MFDA and IPC are now in the process of finalizing a $30 million line of credit with a Canadian bank.

Member assessments will also commence in July, with the first payment due September 30. Assessments are based on a calculation relating to assets under administration, averaged over the prior two years. Each MFDA member will be assessed at a rate of $22 per million of AUA, subject to certain minimums.

The MFDA is not recognized in Quebec and MFDA IPC coverage for customers with accounts in Quebec will not be provided. As a result, they won’t face assessments either.

The IPC and MFDA will be establishing a working group consisting of representatives of the MFDA IPC, the MFDA and mutual fund dealers to review various aspects of the IPC. The committee will report its findings by May 3, 2006.

The working group will also be reviewing the question of advertising IPC coverage. The MFDA is currently working on a brochure members will be required to provide to their customers. The brochure will outline various aspects related to the IPC including limits of coverage; funding the IPC; who is eligible for coverage; making a claim; etc.