By Bill Mann, MarketWatch

PORT TOWNSEND, Wash. (MarketWatch) — Canadian investors in MF Global, unlike those in the U.S., are feeling a lot more of the holiday spirit these days than their U.S. counterparts.

That’s because they have a government investor safety net that actually works. (Cue the ever-indignant anti-regulatory crowd.)

And it’s not just protection for stock and bond investors, a tiny part of the MF Global fiasco. Futures investors are also protected in Canada. Imagine.

U.S. publications like Forbes calling for more whistle-blowers inside MF Global are missing the point — the point being that U.S. futures investors have no federal backstop. Sorry, but forensic accounting is too little, too late. And beside the point.

Amidst the “Where’s the money?” cries and John Corzine’s ongoing testimony this week about the bankrupt brokerage firm’s collapse, one important story has been overlooked by the U.S. business press: There’s a better way of protecting investors, and Canada has it. It’s called an investor safety net, and probably more than a few of the thousands of money-losing MF Global investors in this $1.2 billion fraud case — even those who say they hate safety nets — would welcome one about now.

The U.S. Securities Investment Protection Corp. (SIPC) not only doesn’t provide investor insurance against fraud, it doesn’t cover futures contracts, which is what the vast majority of MF Global customers had.

A better way to regulate

The SIPC has a direct Canadian equivalent, the Canadian Investor Protection Fund (CIPF), and the MF Global bankruptcy and its cross-border nature has given us the rare chance to see the CIPF in action — while watching the SIPC flail away. One Canadian business columnist quite accurately called it the “Pepsi Challenge of investment-protection systems.”

“And with a commodities-futures-centric brokerage firm like MF Global,” writes the Globe and Mail’s David Parkinson, “it didn’t take long to discover which one left a foul taste in investors’ mouths.”

Because the SIPC doesn’t cover futures contracts, forget all the press attention lately about the SIPC trying to get investors’ traditional stock and bond investments back. Only about 1 percent of MF Global’s accounts were securities accounts.

Here’s the big story: Canada’s CIPF, by contrast, covers ALL investment accounts, whether it’s stocks, bonds, currencies or futures. A true investor safety net, in other words.

The MF Global fiasco has revealed a massive hole in the U.S. protection system. It’s the sort of thing that gets Rep. Barney Frank’s and potential U.S. Senator Elizabeth Warren’s attention.

When the SIPC was created 40 years ago, futures were of little interest to many investors; they were an investment backwater. The Commodities Futures Trading Commission now oversees futures, which have become popular with many investors. (I even met a rustic guy in Northern California who, when he’s not cutting firewood for a living, trades coffee futures in his beat-up office in a beat-up mobile home.)

Dull, but effective

But neither the CFTC nor the futures-trading industry has bothered to set up an investor-compensation fund like the CIPF. Given the evolution of Wall Street and U.S. banks into glorified casino operations, that’s not exactly a surprise.

But then, there’s the alternative, the “old-fashioned” Canadian financial system. You know, the country that doesn’t have bank failures and bailouts. Dull by Las Vegas standards, true, but arguably much better for investors.

Canada clings to the quaint idea that cowboy capitalism probably isn’t a good idea, that government regulations — and investor protection — are necessary. Canada’s safety net may have taken a while to kick in this time, but kick in it did. And there weren’t holes in it.

Each investment account in Canada is insured for losses up to $1 million in the event of insolvency. The entire amount can be taken in cash, if that’s what the client lost. The SIPC provides a maximum of $250,000 cash on any claim.

Not surprisingly MF Global Canada’s role in the big fraud has been far less “exciting” than in the U.S. MF Global Canada’s branch wasn’t insolvent, but was forced into bankruptcy due to a short-term capital shortfall caused by funds residing in the U.S. that were frozen by the U.S. head office’s bankruptcy. The Toronto Globe and Mail reports that all of MF Global Canada’s funds are now accounted for, even if its clients in Canada had their accounts frozen and couldn’t get to their cash, which was, after all, still there. For several weeks this fall, they weren’t happy campers, but they weren’t devoured by a rogue bear, either.

So there’s a happy ending to this sordid affair — on the Canadian side of the border, anyway. It doesn’t look like Canadian investors have lost a single loonie in this mega-fraud. MF Global’s accounts in the Great White North have all been transferred intact to other brokerages.

How’s that for adding to investors’ holiday spirit?

As one Toronto business columnist put it so well: “When it comes to catching investors who are falling from a collapsing brokerage firm, Canada is the place to be.”

Bill Mann is a MarketWatch columnist, based in Port Townsend, Wash.