Loss limits are designed to provide warnings to clients holding crypto that have seen significant losses. Each client will have their own unique loss limit based on answers to the in-app mandatory risk survey. This helps us understand your financial situation and your comfort with risk.
If your account approaches or exceeds your loss limit, we will notify you by email about your account’s performance. This is to help ensure that you are aware that there have been losses within your account. While we can’t give you investment advice, we want you to know how your account is performing, and to consider whether your crypto investments are still in line with your financial goals.
Why do we have loss limits?
We are required under securities legislation to know your client. However, more specifically, we are required to collect certain information about our clients’ financial circumstances, experience in trading and risk tolerance under the terms and conditions with the Canadian Securities Administrators which permit us to operate Wealthsimple Crypto. These requirements can be reviewed on the Ontario Securities Commission website. These terms and conditions also require us to apply a client limit (or “loss limit”) to each client based on the information we collect. Loss limits are a regulatory requirement that provides precautions to clients on Wealthsimple Crypto that have experienced significant realized or unrealized losses.
How are loss limits calculated?
Both new and existing Crypto clients are required to provide the necessary information that allows us to understand their risk profile and support in the calculation of their Crypto loss limits.
- For new clients, the risk survey is part of the Crypto account opening process.
- For existing clients, the risk survey should take 2-5 minutes to complete.
Loss limits are unique to each individual account. They take into account several factors including:
- Net assets
- Prior crypto experience
- Prior investment experience
- Risk tolerance
When calculating losses to determine if you are approaching your loss limit, we use the following equation: Cumulative Lifetime Portfolio Gains/Losses(PnL) = Cumulative Realized Gains/Losses + Unrealized Gains/Losses
- Cumulative Realized Gains/Losses update when you sell or withdraw an asset
- Average Cost Basis for each crypto asset updates when your buy or deposit an asset
- Unrealized Gains/Losses are calculated daily based on Average Cost Basis.