Question of the Week – What are GICs?

Submitted by nsscadmin on Wed, 08/21/2019 - 10:00

In a throwback to look at some basic investments, we’ve been asked to go over Guaranteed Investment Certificates (GICs).

You may have heard the term GICs on a commercial for a financial institution or on an online ad. A GIC Is a deposit certificate that is issued by a financial institution to an investor. The investor is effectively providing a short-term loan to the financial institution in exchange for their principal and interest being paid at maturity.

The term on a GIC can be a short as 30 days, or as long as 10 years. Typically, the longer the term the higher the interest paid. One important note, GICs with terms over five years from a bank are not protected by Canada Deposit Insurance Corporation. Most GICs pay a fixed-interest rate at maturity, but there are some GICs that have their returns tied to an index. GICs tied to an index typically have limits on how much an investor can make, so be sure to look at that before making any investment.

GICs are nearly risk free, as there is practically no risk that the financial institution will not pay you your principal and interest upon maturity. The only risk comes in if you need to cash out a GIC prior to its maturity date. Most GICs are locked in until maturity and can only be withdrawn early if the investor pays a redemption fee.

Failure to file annual financial statements.
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Failure to file an annual or interim management’s discussion and analysis (MD&A) or an annual or interim management report of fund performance (MRFP).
Failure to file an Annual Information Form (AIF).
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Failure to file a business acquisition report.
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Failure to include disclosure in an issuer’s MD&A relating to disclosure controls and procedures and their direct effectiveness that is referred to in a certificate filed under MI 52-109.
Financial statements of the reporting issuer, or the auditors’ report accompanying the financial statements, do not comply with the requirements of NI 51-102 Continuous Disclosure Obligations (NI 51-102), National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) or National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107).
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The reporting issuer’s AIF, MD&A, MRFP, information circular, or business acquisition reports do not contain information for each of the content items required by NI 51-102 or NI 81-106.
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