The Mutual Fund Dealers Association of Canada’s (MFDA) contingency fund has received almost $8 million in claims related to the lone fund dealer insolvency last year, and it expects more.

In its latest annual report, the MFDA’s Investor Protection Corp. (IPC) indicates that it has received $7.9 million in claims relating to the insolvency of W.H. Stuart Mutuals, Ltd. (WHS), which was suspended by the MFDA on May 31. It was deemed insolvent by the IPC board as of that date, for the purpose of claims by customers against the fund. (See Investment Executive, MFDA suspends W.H. Stuart, June 3, 2013.)

The firm was placed under the administration of a bankruptcy trustee on Sept. 18, it reports; and it says that, as of Sept. 20, the IPC had received claims totaling $7.9 million, and that it expects to receive additional claims. “It appears that some client accounts may have shortfalls in the amount of cash or mutual funds owed to these clients,” it says.

However, it’s not yet clear how much the fund may have to pay out. “Until such time as the claim forms for WHS are reviewed, assessed and the MFDA IPC completes its approval process to determine that the claims are eligible under its coverage policy, management does not believe it is possible to make a reliable estimate of the amount of potential claims payable by the fund,” it says in the report.

Absent a reliable estimate of the potential claims, there’s no provision for these claims in the IPC’s latest financial statements, it notes. Currently, the fund has a balance of $35.3 million (as of June 30); it charges dealers an annual assessment of about $2.9 million, and it maintains a $30-million credit facility, and an additional $20 million of insurance coverage.

According to the report, revenues exceeded expenses by $2.0 million during the latest fiscal year, compared to $3.0 million in 2012. Operating expenses increased by 34% from the previous year, it says, due to 2013 being the first full year of the excess fund insurance coverage (the full year’s premium was $292,320). Excluding the change in insurance premium, operating expenses were essentially flat year over year.

The IPC is aiming to build a $50 million reserve over the next few years, a process that began in 2011. In its report, it notes that a review of the planned target, and the rate of accumulation of funds, will be required once the WHS insolvency is resolved.