Catastrophe Futures

What is ‘Catastrophe Futures’

Catastrophe futures are futures contracts traded on the Chicago Board of Trade (CBOT). These futures contracts are used by insurance companies to protect themselves against future catastrophe losses. The value of a catastophe futures contract is equal to $25,000 multiplied by the catastrophe ratio for the quarter. The catastrophe ratio is a numerical value provided by the CBOT every quarter.

BREAKING DOWN ‘Catastrophe Futures’

Catastrophe futures started trading on the Chicago Board of Trading (CBOT) in 1992. The value of a catastrophe future contracts increase when catastrophe losses are high and decrease when catastrophe losses are low. In the event of a catastrophe, if losses are high, the value of the contract goes up and the insurer makes a gain that hopefully offsets whatever losses that might be incurred. The reverse is also true. If catastrophe losses are lower than expected, the value of the contract decreases and the insurer (buyer) loses money.

Why Catastrophe Futures Were Needed

Property owners, especially those in catastrophe prone areas, are faced with the unavailability of insurance coverage as well as an increased deductible level, restricted coverage and increased prices when coverage is available. Insurance companies are faced with increased demand from insureds, regulatory restrictions on price increases, and increasing retention levels and prices associated with decreasing reinsurance capacity.

Reinsurers, once able to retrocede risk to other reinsurers, are now accepting business from ceding companies under extremely limited terms. Governments, as regulators of the insurance markets, must play a role administering the estates of companies rendered insolvent by catastrophes and organizing governmental or quasi-governmental facilities providing primary insurance or reinsurance capacity.

How Catastrophe Futures Work

Catastrophe future payoffs are derived from an underwriting loss ratio that measures the extent of the US insurance industry’s catastrophe losses, relative to premiums earned for policies in some geographical region over a specified time period. The loss ratio is multiplied by a notional principal amount to obtain the dollar payoff for the contract. 

Insurers and reinsurers use catastrophe futures (and options) to hedge underwriting risks posed by catastrophes. For example, when taking a long position, an insurer implicitly agrees to buy the loss ratio index at a price equal to the current futures price. Accordingly, a trader taking a long catastrophe futures position when the futures price is 10 percent commits to paying 10 percent of the notional principal in exchange for the contract’s settlement price. If the futures loss ratio equals 15 percent of the notional principal, there is a 5 percent profit. Conversely, if the settlement price is 5 percent at expiration, the trader pays 10 percent and receives 5 percent of the notional principal.

Business Auto Coverage Form

What is ‘Business Auto Coverage Form’

The business auto coverage form is an insurance form that insurers provide to business owners when creating a contract to provide insurance coverage for the company’s cars, trucks, trailers, vans or other vehicles. The form is divided into five sections that define the coverage, including the types of vehicles, causes of damage and types of damage covered, in addition to both the insurer’s and business’s obligations in the event that damage occurs.

BREAKING DOWN ‘Business Auto Coverage Form’

The business auto coverage form helps businesses review the different coverage options available to them, enabling them to select coverage that meets their company’s needs while keeping costs to a minimum. Coverage may include vehicles that are owned or leased by the company or its employees.

Potential policyholders must pay careful attention to the numerical symbols listed in the policy declarations to signal which autos are insured for the various coverages. These symbols, called covered auto designation symbols, include the numbers 1 through 9 plus 19. Each symbol represents a category of covered autos. For instance, symbol 1 means “any auto” while symbol 2 means “owned autos only.”

The business auto coverage form includes only two coverages: auto liability and physical damage. Other coverages and coverage amendments may be added by an endorsement. The declarations section of your policy indicates the vehicles that are “covered autos” for each coverage you have purchased. For example, suppose you have purchased liability coverage for all types of autos. These include autos your company owns, autos it hires, and autos it doesn’t own.

Many insurers also offer “broadening” endorsements that can be added to the standard commercial auto policy (they aren’t usually listed in the business auto coverage form). These endorsements typically include coverage enhancements under both liability and physical damage. They are a convenient way to obtain a group of coverages at a reasonable price. Because the endorsements aren’t standard, they vary widely from one to the next. 

Five Sections of the Business Auto Coverage Form

The business auto coverage form is a very common document for companies that must insure motor vehicles. The form has five sections to it, each providing details about the type of coverage provided. The sections usually include:

  • Types of vehicles: It outlines the specific vehicles covered by this particular contract.
  • Causes of damage: May include things like storms and fires
  • Types of damage covered: This lists the types of included perils or incidents covered by the policy.
  • Insurer’s obligations: This lists what the requirements are of the insurer in providing and signing the contract.
  • Business’s obligations: This lists all responsibilities of the business in maintaining the contract.

Accelerated Option

What is ‘Accelerated Option’

An accelerated option in an insurance contract, usually in the form of a rider, allows for accelerated benefits or partial benefits sooner than they would otherwise be payable. Alternatively, in life insurance contracts, an accelerated option can refer to the option that allows the policy holder to apply the accumulated cash value to pay off the policy.

BREAKING DOWN ‘Accelerated Option’

One form of an accelerated option is the accelerated death benefit rider in a whole life insurance policy. Accelerated benefits, also known as “living benefits,” are life insurance policy proceeds paid to the policyholder before he or she dies. The benefits may be provided in the policies themselves, but more often they are added by riders or attachments to new or existing policies.

The terms and conditions of receiving the benefits are outlined in advance, and almost always include a provision for benefits if the policyholder becomes terminally ill. An accelerated option can also be activated when the need for long-term care or a medically incapacitating condition arises. The life insurance company will deduct the accelerated benefits payment from the death benefit it ultimately pays to the beneficiary.

Some insurers add an accelerated option to a life insurance policy for a small additional premium, usually computed as a percentage of the base premium. However, more insurance companies are offering these benefits at no additional premium, but charge the policyholder for the option only if it is used. In most cases, the life insurance company will reduce the benefits advanced to the policyholder before death to compensate it for the interest it will lose on its early payout. There may also be a nominal service charge.

Accelerated benefit options are usually added to whole, universal or other permanent life insurance policies, but some insurers are offering them in term life policies. Accelerated benefits may also be available through group term or group permanent life insurance policies. Accelerated options are usually offered at the time of purchasing a new life insurance policy, but many insurers will also add them to existing policies.

Accelerated Option Payouts

Life insurance policyholders with an accelerated option can expect to get 25 to 100 percent of the death benefit as early payment. The amount varies from policy to policy. The difference usually comes if accelerated benefits are added to the policy without an additional premium. Payments are made in monthly installments or in a lump sum. Some policies allow the policyholder to choose the method of payment. Each policy or rider specifies the payout methods available for accelerated options.

DNotes 2.0 Now Listed on Mercatox Exchange

DNotes Global, Inc. has announced that its cryptocurrency under management, DNotes is now trading on the Mercatox digital currency exchange.

CHICAGO, IL / ACCESSWIRE / JUNE 9, 2018 / DNotes Global, Inc. has announced that its cryptocurrency under management, DNotes is now trading on the Mercatox digital currency exchange. DNotes, which received a major technological upgrade earlier this year, has been listed under the ticker symbol ‘NOTE.’

DNotes Global Chief Technology Officer, Theodore Hauenstein, expressed his company’s appreciation for the Mercatox team’s efficient listing process. “It has been a true pleasure to work with the folks at Mercatox,” Hauenstein said. “Their team has been professional and responsive at every step of the way. We look forward to a long and mutually beneficial relationship with their exchange.”

Mercatox markets itself as a universal market platform that combines the best features of automated trading, smart contract-based peer-to-peer sharing, payment services, and more. The company says that its goal is to “create a new financial market in the digital world” and currently offers trading for popular digital currencies like Bitcoin and Ethereum, as well as a large selection of altcoins.

DNotes 2.0 is the most current version of the DNotes digital currency which includes new technological features and expanded benefits for the currency’s stakeholders. According to DNotes Global CEO Alan Yong, the upgrade marks the beginning of his company’s accelerated push to achieve its broader goal of gaining global acceptance and adoption as a mainstream currency.

“Our mission has not changed,” Yong said. “DNotes was never designed to be a niche solution for a niche problem. From the beginning, we have been committed to creating a trusted digital currency that people around the world can rely on for greater financial inclusiveness and empowerment. Digital currency must be able to improve people’s lives. At DNotes Global, we are committed to ensuring that DNotes fulfills that promise.”

The upgraded DNotes includes new features and improvements to existing benefits. The most noticeable is the currency’s switch from proof-of-work to a proof-of-stake network consensus model. That change was prompted by the company’s desire to reduce the influence of digital currency miners and empower the currency’s stakeholders. The DNotes blockchain now also rewards savers with 0.5 percent interest per month for all balances that are not moved during that month’s CRISP period.

Yong believes that the new proof-of-stake and saving models will better reflect the company’s commitment to maximize DNotes’ benefits for those who hold and use the currency. As Yong noted, it is the currency’s stakeholder community that have the most concrete interest in DNotes achieving its adoption and utility goals.

Yong pointed to DNotes’ other newly-added features and benefits are just as critical to achieving these goals. For example, the company implemented a new blockchain invoicing system that will provide each DNotes transaction with its own unique identifier – to simply merchant use of the digital currency and help them reduce the need for third-party transaction-management options. The company taking charge of DNotes’ development, DNotes Global has other blockchain software in development, and is currently upgrading its supporting business applications that the currency operates on to simplify the digital currency user experience.

A company spokesperson has confirmed that DNotes Global is currently in talks with other cryptocurrency exchanges, to provide DNotes users with a growing array of trading options.

About DNotes and Alan Yong

DNotes co-founder Alan Yong is a well-regarded visionary who established Dauphin Technology in 1988. He is the author of the book “Improve Your Odds: The Four Pillars of Business Success,” and is well-regarded as a “thought leader” in the cryptocurrency industry.

DNotes is a digital currency noted for its consistent and reliable growth, and innovative initiatives that actively engage women, young people, small businesses, workers, and others – effectively inviting the world to participate in the digital currency revolution.

For more information please visit:

To trade DNotes please visit:

To view the DNotes white paper, please visit:


Name: Alan Yong
Email: [email protected]

SOURCE: DNotes Global, Inc.

Trump Says U.S. Won’t Endorse G-7 Communique, Threatens Auto Tariffs

President Donald Trump said the U.S. wouldn’t endorse the final communique released at the conclusion of the Group of Seven industrial nations conference and threatened auto tariffs, citing “false statements” by Canada’s prime minister.

On Twitter on Saturday, hours after leaving the G-7 summit in Quebec to fly to Singapore for a meeting with North Korean leaderKim Jong Un, Mr. Trump called Prime Minister Justin Trudeau meek, weak and dishonest.

SportsWatch: Justify wins 2018 Belmont, seizes horse-racing’s Triple Crown in historic undefeated run

Kentucky Derby and Preakness Stakes winner Justify ran into the history books Saturday, winning the Belmont Stakes in wire-to-wire fashion and completing horse racing’s Triple Crown, becoming just the 13th horse to accomplish that feat and only the second undefeated horse to do so.

Justify was a heavy 4-5 favorite among the betting crowd in Elmont, N.Y. attending the 150th Belmont Stakes. He paid $3.60 for the win.

Gronkowski, a horse named after the New England Patriot’s tight end who bought an ownership stake in the horse before the Kentucky Derby, ran late to finish second at 24-1 and paid $13.80 to place. Hofburg, the second choice at 5-1, ran third, paying $3.70 to show.

Justify, who had bankrolled just under $3 million with help from wins in the Santa Anita Derby, Kentucky Derby and Preakness Stakes added $800,000 to that total by taking down the winner’s share of the $1.5 million Belmont purse.

Justify became just the 13th horse to win the Triple Crown and just the second undefeated horse to capture the elusive prize. Only Seattle Slew in 1977 had accomplished that feat. Majestic Prince in 1969, Smarty Jones in 2004 and Big Brown in 2008 went into the Belmont Stakes undefeated after winning the Kentucky Derby and Preakness but were beaten as big favorites in the third leg of the Triple Crown.

American Pharoah is the last Triple Crown winner, having swept the series in 2015. Neither Nyquist or Always Dreaming, the Kentucky Derby winners of 2016 and 2017, were able to capture the middle jewel of the crown in the Preakness Stakes.

Trainer Bob Baffert, who saddled American Pharoah, became just the second trainer in history to win more than one Triple Crown. Jim Fitzsimmons also scored Triple Crowns twice, in 1930 with Gallant Fox and five years later in 1935 with Omaha.

Mike Smith, at 52, became the oldest jockey to ride a Triple Crown winner. Smith and Baffert are already both members of horse racing’s Hall of Fame. They are now certain to be joined by Justify.

Adoption Credit

What is an ‘Adoption Credit’

An adoption credit is a federal tax credit that may be claimed by federal taxpayers who incur qualifying expenses to adopt an eligible child. Qualifying expenses include adoption fees, court costs, attorney fees and travel expenses. To be eligible, a child must be under 18 or physically or mentally incapable of self-care.

Some costs that are paid before an eligible child has been identified and adopted may still qualify as adoption expenses. For example, prospective adoptive parents who pay for a crib before they identify a child to adopt can include the cost as a qualified adoption expense.

The adoption credit has been refundable in some years, meaning that it could be claimed even if the credit exceeded the taxpayer’s tax liability, in which case the taxpayer is due a refund. In other years, the adoption credit has been nonrefundable, meaning that it could be deducted from the taxpayer’s tax liability only until the liability equals $0.

To claim the adoption credit, taxpayers must submit adoption documents and form 8839, Qualified Adoption Expenses, along with their federal tax return. Form 8839 allows taxpayers to calculate the amount of the credit. It also asks for the child’s first and last name and birth year, as well as whether the child has special needs, is foreign born or is disabled.

Breaking Down ‘Adoption Credit’

The maximum amount of the adoption credit for 2017 is $13,670 per child. As of 2017, the adoption credit was nonrefundable. However, taxpayers can carry forward any excess of their tax liability for up to five years, mitigating the potential negative impact of the credit for low-income taxpayers. If the taxpayer’s employer also provides adoption assistance payments, these will reduce the amount of the credit.

In 2017, the credit begins to phase out for families with incomes of $203,540, and phases out entirely at incomes of $243,540. Families with upper-middle incomes tend to benefit the most from the adoption credit as it is currently modeled. Lower-income families are hampered by the credit’s non-refundability, while the highest-income families do not have access to the credit.

The Adoption Credit and Special Needs Children

Special needs adoptions automatically qualify for the maximum amount of the adoption credit, no matter the adoptive parents’ expenses. For the purposes of the credit, children are defined as having special needs if a state’s welfare agency rules that they cannot or should not be returned to their parents’ home, and that the adoptive family requires assistance to adopt them. This provision exists to encourage parents to adopt hard-to-place children.

WPP Probed Whether Former CEO Martin Sorrell Used Company Money for a Prostitute

The WPP PLC board investigation that preceded the exit of Martin Sorrell as chief executive addressed whether he used company money for a prostitute, people familiar with the matter said.

The Wall Street Journal reported in April that the board of the advertising giant was looking into an allegation of improper personal behavior and whether its chief executive had misused company assets, and that the board had retained a law firm for a probe.

NewsWatch: Trump: With my ‘feel,’ I’ll know if Kim is serious within a minute


As he leaves Canada for Singapore, the U.S. president says he’ll be able to make a snap judgement on whether the North Korean leader is playing him or is serious about giving up nuclear weapons. See full story.

Vanguard thinks its own employees should own this fund, not the S&P 500. They’re right

What took them so long? See full story.

Doctor’s offices are a hot investment — what does that mean for profit vs. patient care?

Private-equity firms are buying doctor’s offices across the U.S. — but critics say profits are coming before patients, and driving up health costs. See full story.

Trump calls for ‘tariff-free’ G-7, just days after bringing in tariffs

President says relationship with G-7 allies is “a 10” as he rails against “bad” trade deals of the past that let other countries take advantage of the U.S. See full story.

Anthony Bourdain’s death confirmed as suicide: report

No evidence of foul play after the television star and chef was found dead by suicide in the bathroom of his hotel room, French prosecutor tells AP. See full story.


Kentucky Derby and Preakness Stakes winner Justify will make a run for the horse-racing record books Saturday as he attempts to win the Belmont Stakes and complete a historic sweep of the Triple Crown. See full story.

Pledging Requirement

DEFINITION of ‘Pledging Requirement’

Pledging Requirement is any legal or bureaucratic requirement that securities be pledged as collateral for public fund deposits or other specific deposits. These securities must be marketable and trade actively. Treasury securities are usually pledged at full face value, while banker’s acceptances and commercial paper are taken at 90% of their face value.

BREAKING DOWN ‘Pledging Requirement’

Pledging banks usually keep pledged securities in some sort of separate account. These securities can be held by many different institutions, such as an independent trustee or Federal Reserve Bank. They can then serve as collateral for deposits made by local and state governments as well as the federal government.

How Pledging Works

Bnaks must pledge securities when they borrow from the Federal Reserve’s Discount Window. The discount window is a central bank lending facility meant to help commercial banks manage short-term liquidity needs. The Federal Reserve and other central banks maintain discount windows, referring to the loans they make at an administered discount rate to commercial banks and other deposit-taking firms. Discount window borrowing tends to be short-term – usually overnight – and collateralized. These loans are different from the uncollateralized lending banks with deposits at central banks do among themselves; in the U.S. these loans are made at the federal funds rate, which is lower than the discount rate.

The following types of instruments can be pledged, according to

Obligations of U.S. government agencies and government sponsored enterprises; Obligations of the United States Treasury; Obligations of states or political subdivisions of the U.S.; Collateralized mortgage obligations; Asset-backed securities; Corporate bonds; Money market instruments; Residential real estate loan; Commercial, industrial, or agricultural loans; Commercial real estate loans and Consumer loans.

The full value of the loan needn’t be pledged. The Federal Reserve Discount Window and has a Payment System Risk Collateral Margins Table that “includes collateral margins for the most commonly pledged asset types. Assets accepted as collateral are assigned a collateral value (market value or estimate multiplied by the margin) deemed appropriate by the Federal Reserve Bank. The financial condition of an institution may be considered when assigning values.”

The pledging of collateral is one reason why banks generally prefer to borrow from other banks, since the rate is cheaper and the loans do not require collateral. But the window is an important lender of last resort when the financial system is under stress. Every financial institution knows it can raise cash immediately in the case of a liquidity crunch or crisis.

Water Quality Improvement Act Of 1970

DEFINITION of ‘Water Quality Improvement Act Of 1970 ‘

Water Quality Improvement Act Of 1970 is legislation that expanded the federal government’s authority over water quality standards and water polluters. The Water Quality Improvement Act Of 1970 grew out of the 1948 Federal Water Pollution Control Act and placed additional limits on the discharge of oil into water where it could damage human health, marine life, wildlife or property. The act also included a number of other provisions intended to reduce water pollution. Federal regulation of water pollution dates back to 1886, when the River and Harbor Act was signed into law.

BREAKING DOWN ‘Water Quality Improvement Act Of 1970 ‘

The Water Quality Improvement Act of 1970 expanded Federal authority, and established a State certification procedure to prevent degradation of water below applicable standards.

The EPA noted that, “Despite the improvements achieved by each amendment to the original (1948) Act, the result of this sporadic legislation was a hodgepodge of law. Eleven reorganizations and restructurings of Federal agency responsibility compounded the difficulty of effectively implementing the law. To solve these problems, the 1972 amendments to the FWPCA restructured the authority for water pollution control and consolidated authority in the Administrator of the Environmental Protection Agency.

The first national goal of the act was the elimination of the discharge of all pollutants into the navigable waters of the United States by 1985. The second national goal was an interim level of water quality that provides for the protection of fish, shellfish, and wildlife and recreation by July 1, 1983. 

Water Pollution Today

Although water pollution has been reduced substantially since the 1970s, the figures for 2018 show that much needs to be done. Over two-thirds of U.S. estuaries and bays are severely degraded because of nitrogen and phosphorous pollution and 45% of U.S. streams, 47% of lakes, and 32% of bays are polluted. In addition, some 40% of America’s rivers are too polluted for fishing, swimming or aquatic life; the corresponding figure for lakes is 46%. Much of the pollution these days is caused by pesticides, whereas in the early 1970s it was direct dumping of chemicals and other pollutants into the water by industry.

Potential accidental water polluters can protect themselves from the liabilities they face under federal water regulations by purchasing marine pollution insurance. This insurance covers losses such as cleanup, damage to natural resources, legal defense and civil penalties. Mobile drilling units, cargo owners and operators, ship yards, and marina owners and operators are examples of businesses that can benefit from having this type of insurance coverage.

McFadden Act

DEFINITION of ‘McFadden Act’

The McFadden Act is Federal legislation that gave individual states the authority to govern bank branches located within the state. This includes branches of national banks located within state lines. The act was intended to allow national banks to compete with state banks by permitting them to open branches within state limitations.


The McFadden Act was passed by Congress in 1927. It was modified in 1994 by the Riegle-Neale Interstate Banking and Branching Efficiency Act, which allowed banks to open limited service bank branches across state lines by merging with other banks. This act repealed the earlier provision within the McFadden Act prohibiting this practice.

Legislative History

The act came amid the boom years of the 1920s when the sky seemed the limit for stocks, banks and the economy. The Federal Reserve, established in 1914, had been a huge success. The United States was considerably more unstable financially before the creation of the Federal Reserve. Panics, seasonal cash crunches and a high rate of bank failures made the U.S. economy a riskier place for international and domestic investors to place their capital. The lack of dependable credit stunted growth in many sectors, including agriculture and industry. 

According to, The McFadden Act tackled three broad issues. “The first issue involved the Federal Reserve’s longevity. The original charters of the twelve Federal Reserve District Banks were set to expire in 1934, twenty years after the banks began operations. This twenty-year limit mirrored the twenty-year charters given to the First and Second Banks of the United States, the Fed’s nineteenth-century forerunners. Congress refused to recharter those institutions. Everyone knew this fact. The precedent threatened the Fed. To alleviate uncertainty, Congress not only rechartered the Federal Reserve Banks seven years early, but it also rechartered them into perpetuity.

The second issue focused on branch banking. From 1863 through 1927, banks operating under corporate charters granted by the federal government (known as national banks) had to operate within a single building. Banks operating under corporate charters granted by state governments (called state banks) could, in some states, operate out of multiple locations, called branches. Laws concerning branching varied from state to state. The McFadden Act allowed a national bank to operate branches to the extent permitted by state governments for state banks in each state.”

Finally, the McFadden Act leveled the playing field between fed-chartered commercial banks that belonged to the Federal Reserve System and commercial banks that did not by allowing more and riskier investments and fewer regulations, all of which would have repercussions in the crash of 1929, and the bank failures and Depression that followed.

Underemployment Equilibrium

DEFINITION of ‘Underemployment Equilibrium’

Underemployment Equilibrium is a condition where underemployment in an economy is persistently above the norm and has entered an equilibrium state. This, in turn, is a result of the unemployment rate being consistently above the natural rate of unemployment or non-accelerating inflation rate of unemployment (NAIRU) due to sustained economic weakness.

BREAKING DOWN ‘Underemployment Equilibrium’

Underemployment in an economy implies that workers have to settle for jobs that require less skill than they possess, or that offer lower wages or fewer hours than they would like. The degree of underemployment is dictated by the strength (or lack thereof) of the job market, and tends to rise when the economy and employment are weak. Advocates of Keynesian economics suggest that a solution to an underemployment equilibrium state is through deficit spending and monetary policy to stimulate the economy.

Underemployment Conditions

Although the economy in 2018 had fully recovered from the great recession of a decade earlier and unemployment has fallen from over 10% to under 5%, the notion of underemployment remained. According to the Federal Reserve, “the fraction of Americans working part time for economic reasons (PTER) remains relatively elevated. Measurement of underemployment, i.e., working fewer hours than one is willing to, has important implications for understanding labor market conditions and the strength in the broader economy.”

PTER substantially underestimates underemployment along the dimension of hours people are actually working–relative to the numbers they would prefer to work at current wages, the Fed reported.

“Textbook economic theory suggests that an individual will work until his or her marginal utility of leisure is equal to his marginal utility of consumption multiplied by his or her wage. That is, the individual should be indifferent, at equilibrium, between working an additional hour and earning extra wages compared with spending an hour on leisure activities. By this logic, underemployment occurs when some workers cannot work enough hours to satisfy this indifference condition. Indeed, people who have a full-time job, and thus are not included in the PTER statistics, may desire to work even more hours at their current wage level but are not able to for similar economic reasons that keep other people working only part time even though they would prefer full-time work.”

How to bring underemployed workers more fully into the economy is a challenge that has vexed policymakers for years. It’s not clear whether stagnant wages are behind this or whether there are other reasons why so many Americans have dropped down or out of the labor force.


DEFINITION of ‘Smishing’

The use of SMS (short messaging services) technology to phish for individuals’ sensitive personal information, such as Social Security numbers or user names and passwords for online banking. Smishing can also be used to infect users’ phones and related networks with destructive viruses or eavesdropping software. Smishing, like phishing, is a criminal activity.


If it’s electronic and contains personal info, cyber crooks can and will find a way in. Text messages are the least likely identity fraud vehicle to be suspected by consumers. 

Betrayal of Trust

“Smishing is particularly scary because sometimes people tend to be more inclined to trust a text message than an email,” notes online security firm Norton. “Most people are aware of the security risks involved with clicking on links in emails. This is less true when it comes to text messages.”

The security firm said that some smishers text with a message that states that if you don’t click a link and enter your personal information that you’re going to be charged per day for use of a service. “If you haven’t signed up for the service, ignore the message. If you see any unauthorized charges on your credit card or debit card statement, take it up with your bank. They’ll be on your side,” Norton stated.

Be especially wary if an SMS comes from a phone number that doesn’t look like a phone number, such as “5000” phone number. This is a sign that the text message is actually just an email sent to a phone. That’s when a Trojan Horse can be transmitted. Any message that contains a clickable link, no matter how familiar the site or sender may be, is capable of infecting your device and stealing your personal information. Thieves are especially fond of sending phony texts from numbers with your same area code and prefix.

Mobile phone users can implement the same precautions that they take against phishing attempts to protect themselves from smishing attempts. These include not clicking on URLs received in text messages, not calling phone numbers given in text messages or that appear in the caller ID field of suspicious text messages, and being wary of messages from unknown or unfamiliar sources. To find out if a text message that appears to be smishing is legitimate, users should contact their financial institutions directly using the phone number provided by the institution, not the number provided by the text message.

Registered Retirement Income Fund – RRIF

DEFINITION of ‘Registered Retirement Income Fund – RRIF’

Registered Retirement Income Fund – RRIF is a retirement fund similar to an annuity contract that pays out income to a beneficiary or a number of beneficiaries. To fund their retirement, RRSP holders often roll over their RRSPs into an RRIF. RRIF payouts are considered a part of the beneficiary’s normal income and are taxed as such by the Canada Revenue Agency in the year that the beneficiary receives payouts. The organization or company that holds the RRIF is known as the carrier of the plan. Carriers can be insurance companies, banks or any kind of licensed financial intermediary. The Government of Canada is not the carrier for RRIFs; it merely registers them for tax purposes.

BREAKING DOWN ‘Registered Retirement Income Fund – RRIF’

The RRIF plan is designed to provide people with a constant income flow through retirement from the savings in their RRSPs. RRSPs must be rolled over by the time the contributor reaches age 69, but by converting an RRSP into an RRIF, people can keep their investments under a form of tax shelter, while still having the chance to allocate assets according to contributor specifications.

How RRIFs Operate

According to the government revenue agency, “You set up a registered retirement income fund (RRIF) account through a financial institution such as a bank, credit union, trust or insurance company. Your financial institution will advise you on the types of RRIFs and the investments they can contain. You can have more than one RRIF and you can have self-directed RRIFs. 

“Starting in the year after the year you establish a RRIF, you have to be paid a yearly minimum amount. The payout period under your RRIF is for your entire life. Your carrier calculates the minimum amount based on your age at the beginning of each year. However, you can elect to have the payment based on your spouse or common-law partner’s age. You must select this option when filling out the original RRIF application form. Once you make this election, you cannot change it. 

“Amounts received from a RRIF upon the death of an annuitant can be transferred directly or indirectly to your RRSP, to your RRIF, to your PRPP, to your SPP or to buy yourself an eligible annuity if you were a qualified beneficiary of the deceased annuitant.

“The existing anti-avoidance rules applicable to registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) have been enhanced to prevent any aggressive tax planning. The rules largely adopt the existing tax-free savings account rules for non-qualified investments, prohibited investments and advantages, with some modifications.”

Retirement of Securities

DEFINITION of ‘Retirement of Securities’

Retirement of Securities is the cancellation of stocks or bonds because the issuer has bought them back, or because its maturity date has been reached.

BREAKING DOWN ‘Retirement of Securities’

Another context in which you might hear the term is the “retirement of debt,” which means debt has been paid off.

Though retired securities have no market value, they often have value to collectors of old stock certificates. Some canceled securities have appeared fraudulently on the international market, leading the SEC to make changes to regulations governing how transfer agents handle canceled stock certificates.

Rules adopted in in 2004 amending The Securities Exchange Act of 1934 “require every transfer agent to establish and implement written procedures for the cancellation, storage, transportation, destruction, or other disposition of securities certificates. This rule will require transfer agents to: mark each canceled securities certificate with the word ‘canceled’; maintain a secure storage area for canceled certificates; maintain a retrievable database of all of its canceled, destroyed, or otherwise disposed of certificates; and have specific procedures for the destruction of canceled certificates. Additionally, the Commission is amending its lost and stolen securities rule and its transfer agent safekeeping rule to make it clear that these rules apply to unissued and canceled certificates.”

How to Check on Old Certificates

What if you find a old share certificates left by your grandfather? Perhaps a few shares of Berkshire Hathaway from the 1960s are worth a fortune today. That’s rarely the case, but there are ways to find out whether they are worth something. Start by looking at a few things on the certificate. Look for the company name and location of incorporation, a CUSIP number, and the name of the person with whom the security is registered. All of these items are important and can likely be found on the certificate’s face.

Most large  discount brokerages are able to help clients track down securities that have been defunct for over 10 years. With the CUSIP number, the brokerage can uncover all splits, reorganizations and name changes that have occurred throughout the company’s history. It can also tell you whether the company is still trading or out of business.

Be sure to see if the shares have the word “canceled” imprinted on them, often with holes punched through the certificate. If so, the share is worthless, but it might be worth something to a collector. 

For a fee, stock search companies will do all of the investigation work for you and, if the certificate ends up having no trading value, they may offer to purchase it for a collector’s value. One company that offers this service is R.M. Smythe.

Registered Retirement Savings Plan Contribution – RRSP Contribution

DEFINITION of ‘Registered Retirement Savings Plan Contribution – RRSP Contribution’

Registered Retirement Savings Plan Contribution are assets invested in an RRSP. Such contributions can be made at any time and for any amount up to an individual’s contribution limit for the year. If a contributor does not make the maximum allowable contribution, the balance of unused contribution room from 1991 onwards is carried forward indefinitely. This allows people to make up for the years that they did not maximize their allowed RRSP contributions.

BREAKING DOWN ‘Registered Retirement Savings Plan Contribution – RRSP Contribution’

An RRSP is a retirement savings and investing vehicle for employees and the self-employed in Canada. Pre-tax money is placed into a RRSP and grows tax free until withdrawal, at which time it is taxed at the marginal rate. Registered Retirement Savings Plans have many features in common with 401(k) plans in the United States, but also some key differences.Because RRSP contributions can be made at any time, are tax deductible and can be made in cash or in-kind, they present a tremendous opportunity for reducing income taxes.

Registered Retirement Savings Plans were created in 1957 as part of the Canadian Income Tax Act. They are registered with the Canadian government and overseen by the Canada Revenue Agency (CRA), which sets rules governing annual contribution limits, contribution timing and what assets are allowed. RRSP information may be found here.

RRSPs have two main tax advantages: Contributors may deduct contributions against their income. For example, if a contributor’s tax rate is 40%, every $100 he or she invests in an RRSP will save that person $40 in taxes, up to his or her contribution limit. And the growth of RRSP investments is tax sheltered. Unlike with non-RRSP investments, returns are exempt from any capital-gains tax, dividend tax or income tax. This means that investments under RRSPs compound at a pretax rate.

In effect, RRSP contributors delay the payment of taxes until retirement, when their marginal tax rate will be lower than during their working years. The Government of Canada has provided this tax deferral to Canadians to encourage saving for retirement, which will help the population rely less on the Canadian Pension Plan to fund retirement.

The RRSP contribution limit for 2018 is 18% of the earned income an individual has reported on their 2017 tax return, up to a maximum of $26,230. In 2019, that figure rises to $26,500. It is possible to contribute more but additional sum over $2,000 will be hit with penalties.

A RRSP account holder may withdraw money or investments at any age. Any sum is included as taxable income in the year of the withdrawal, unless the money is used to buy or build a home or for education (with some conditions).

Government-Sponsored Retirement Arrangement – GSRA

DEFINITION of ‘Government-Sponsored Retirement Arrangement – GSRA’

Government-Sponsored Retirement Arrangement – GSRA is a Canadian retirement plan for individuals who are not employees of a local, provincial or federal government body, but who are paid for their services from public funds. This type of retirement plan is not registered with the Canadian Revenue Agency and therefore does not qualify for tax-deferred status.

BREAKING DOWN ‘Government-Sponsored Retirement Arrangement – GSRA’

Regulations on GSRAs reduce the amount that individuals receiving GSRAs are allowed to contribute to their registered retirement savings plans (RRSPs). Canada law allows the following plans and services:

Canada Retirement and Savings Plans

Registered retirement savings plan. An RRSP is a retirement savings plan that you establish, that the government registers, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan.

Tax-free savings accounts. “The Tax-Free Savings Account (TFSA) program began in 2009. It is a way for individuals who are 18 and older and who have a valid social insurance number to set money aside tax-free throughout their lifetime. Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.  Administrative or other fees in relation to TFSA and any interest or money borrowed to contribute to a TFSA are not deductible,” according to Revenue Canada.

A PRPP is a retirement savings option for individuals, including self-employed individuals. A PRPP enables its members to benefit from lower administration costs that result from participating in a large, pooled pension plan. It’s also portable, so it moves with its members from job to job. Since the investment options within a PRPP are similar to those for other registered pension plans, its members can benefit from greater flexibility in managing their savings and meeting their retirement objectives.

A registered disability savings plan (RDSP) is a savings plan that is intended to help parents and others save for the long term financial security of a person who is eligible for the disability tax credit (DTC).

Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. Contributions that are withdrawn are not included as income to the beneficiary when they are paid out of an RDSP. However, the Canada disability savings grant (grant), the Canada disability savings bond (bond), investment income earned in the plan, and the proceeds from rollovers are included in the beneficiary’s income for tax purposes when they are paid out of the RDSP,” according to Revenue Canada.

Spousal IRA


A spousal IRA is a type of individual retirement account that allows a working spouse to contribute to a nonworking spouse’s retirement savings. This creates an exception to the provision that an individual must have earned income to contribute to an IRA. The working spouse’s income, however, must equal or exceed the total IRA contributions made on behalf of both spouses.


To qualify to make spousal IRA contributions, the couple also must file a joint tax return. Spousal IRAs can be either traditional or Roth IRAs, and are subject to the same annual contribution limits, income limits and catch-up contribution provisions as traditional and Roth IRAs. While IRAs cannot be held jointly in both spouse’s names, spouses can share their account distributions in retirement.

How Spousal IRAs Work

The IRS has extensive rules on how IRAs must be structured; the spousal rule adds some implication to these. In general, anyone who wants to open an IRA must follow these rules:  For 2018, “if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $101,000 but less than $121,000 for a married couple filing a joint return or a qualifying widow(er); more than $62,000 but less than $72,000 for a single individual or head of household, or less than $10,000 for a married individual filing a separate return.”

In addition, “If you are married and your spouse is covered by a retirement plan at work and you aren’t, and you live with your spouse or file a joint return, your deduction is phased out if your modified AGI is more than $186,000 (up from $184,000 for 2016) but less than $196,000 (up from $194,000 for 2016). If your modified AGI is $196,000 or more, you can’t take a deduction for contributions to a traditional IRA.”

Here’s how the spousal provision works, according to the IRS. “if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts. $5,500 ($6,500 if you are age 50 or older). The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts.
Your spouse’s IRA contribution for the year to a traditional IRA. Any contributions for the year to a Roth IRA on behalf of your spouse.

This means that the total combined contributions that can be made for the year to your IRA and your spouse’s IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older, or $13,000 if both of you are age 50 or older).”

Registered Retirement Savings Plan Deduction – RRSP Deduction

DEFINITION of ‘Registered Retirement Savings Plan Deduction – RRSP Deduction’

Registered Retirement Savings Plan Deduction is the amount that a Canadian taxpayer contributes to his or her RRSP. This amount can be deducted from the taxpayer’s annual income to arrive at his or her taxable income for the year. Contribution limits can be determined by filling out Form T1028, which is available online.

BREAKING DOWN ‘Registered Retirement Savings Plan Deduction – RRSP Deduction’

The RRSP deduction amount is found on line 208 of the annual income tax return filed with Canada Revenue Agency. As this is a tax deduction from personal income, it is advantageous for taxpayers to maximize the value of their RRSP deduction – as they minimize the amount of money that is subject to personal income tax.

How RRSPs Work

Canadian taxpayers set up a registered retirement savings plan through a financial institution such as a bank, credit union, trust or insurance company. Your financial institution will advise you on the types of RRSP and the investments they can contain, according to Revenue Canada.

“You may want to set up a spousal or common-law partner RRSP. This type of plan can help ensure that retirement income is more evenly split between both of you. The benefit is greatest if a higher-income spouse or common-law partner contributes to an RRSP for a lower-income spouse or common-law partner. The contributor receives the short term benefit of the tax deduction for the contributions, while the annuitant, who is likely to be in a lower tax bracket during retirement, receives the income and reports it on his or her income tax and benefits return.

You may want to set up a self-directed RRSP if you prefer to build and manage your own investment portfolio by buying and selling a variety of different types of investments. For more information on eligible investments, see Self-directed RRSPs. If you are considering this type of RRSP, be sure to consult with your financial institution. You make your RRSP contributions directly to the RRSP issuer.”

In terms of withdrawals, the agency states that “any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan. However, you generally have to pay tax when you cash in, make withdrawals, or receive payments from the plan. If you own locked-in RRSPs, generally you will not be allowed to withdraw funds from them. If you do not know if your RRSPs are locked in, contact your RRSP issuer. If your RRSPs are not locked in, you can withdraw funds at any time.”