Canada Deposit Insurance Corporation Co-owned and Trust Deposit Disclosure By-law: SOR/2019-312

Canada Gazette, Part II, Volume 153, Number 18

Registration

SOR/2019-312 August 20, 2019

CANADA DEPOSIT INSURANCE CORPORATION ACT

The Board of Directors of the Canada Deposit Insurance Corporation, pursuant to paragraph 11(2)(g) ^{footnote a} of the Canada Deposit Insurance Corporation Act ^{footnote b} and section 14 ^{footnote c} of the schedule to that Act, makes the annexed Canada Deposit Insurance Corporation Co-owned and Trust Deposit Disclosure By-law.

Ottawa, August 2, 2019

Canada Deposit Insurance Corporation Co-owned and Trust Deposit Disclosure By-law

Interpretation

Definitions

1 (1) The following definitions apply in this By-law.

Act means the Canada Deposit Insurance Corporation Act. (Loi)

determination date means, in respect of a member institution,

• (a) if a winding-up order is made in respect of the institution before the day on which the Corporation makes a payment in respect of the majority — in number or value — of the deposits held by the institution that are insured by deposit insurance, the day on which the petition or other originating process is filed in respect of the winding-up; or
• (b) if a winding-up order is not made in respect of the institution before the day on which the Corporation makes a payment in respect of the majority — in number or value — of the deposits held by the institution that are insured by deposit insurance, the day on which any of the circumstances described in subsection 14(2.1) of the Act first occurs in respect of the institution. (date-repère)

senior officer means, in respect of a nominee broker or professional trustee that is not an individual,

• (a) its chief executive officer or a member of its board of directors, or an individual who performs functions similar to those normally performed by someone occupying one of those positions; or
• (b) an officer who reports directly to a person referred to in paragraph (a) or to the board of directors. (cadre dirigeant)

special income arrangement means

• (a) a registered retirement savings plan referred to in subsection 5(1) of the schedule to the Act;
• (b) a registered retirement income fund referred to in subsection 5(2) of the schedule to the Act;
• (c) a tax-free savings account referred to in subsection 5(3) of the schedule to the Act;
• (d) a registered education savings plan referred to in subsection 5(4) of the schedule to the Act; or
• (e) a registered disability savings plan referred to in subsection 5(5) of the schedule to the Act. (arrangement spécial)

Types of special income arrangement

(2) For the purposes of this By-law, each paragraph in the definition special income arrangement describes a type of special income arrangement.

Co-owned Deposits

Information

2 For the purpose of subsection 4(1) of the schedule to the Act, a co-ownership must be disclosed on the records of a member institution before the determination date by

• (a) indicating that the deposit is co-owned; and
• (b) setting out each co-owner’s name.

Trust Deposits

General

Records of member institution

3 (1) For the purpose of subsection 6(1) of the schedule to the Act, if the deposit is neither a nominee broker deposit nor a deposit held in an account identified as a professional trustee account, the trusteeship must be disclosed on the records of the member institution before the determination date by

• (a) indicating that the deposit is held in trust; and
• (b) setting out each trustee’s name and one trustee’s address.

Interest or right of beneficiary

(2) For the purpose of subsection 6(2) of the schedule to the Act, if the deposit is neither a nominee broker deposit nor a deposit held in an account identified as a professional trustee account, the trusteeship must be disclosed on the records of the member institution before the determination date by

• (a) indicating that the deposit is held in trust;
• (b) setting out each trustee’s name and one trustee’s address; and
• (c) setting out the beneficiary’s name and address.

Multiple beneficiaries

(3) For the purpose of subsection 6(3) of the schedule to the Act, if the deposit is neither a nominee broker deposit nor a deposit held in an account identified as a professional trustee account, a beneficiary’s interest or right in the deposit must be disclosed on the records of the member institution before the determination date by

• (a) indicating that the deposit is held in trust;
• (b) setting out each trustee’s name and one trustee’s address;
• (c) setting out the beneficiary’s name and address; and
• (d) setting out the amount or percentage of the beneficiary’s interest or right in the deposit.

Special income arrangement

4 If a deposit is received under a special income arrangement from a depositor who is acting as a trustee for another person and it is neither a nominee broker deposit nor a deposit held in an account identified as a professional trustee account, the type of special income arrangement and the name and address of the individual for whose benefit the arrangement is established are to be disclosed on the records of the member institution before the determination date.

Information to depositor

5 (1) For the purpose of subsection 6(5) of the schedule to the Act, the information that the Corporation may require a member institution to provide to a depositor who indicates that they are acting as a trustee for another person includes

• (a) the fact that the depositor is responsible for providing the member institution with, and updating, the information referred to in section 3 for disclosure on the member institution’s records;
• (b) the manner in which the depositor may provide and update that information;
• (c) the fact that failure to provide that information may result in the deposit not receiving full deposit insurance protection; and
• (d) the fact that the Corporation will rely on the latest information disclosed on the member institution’s records, which could affect deposit insurance coverage.

Time and manner

(2) The information must be provided in writing at the time of opening an account for the depositor and during the month of March in each year.

Exception

(3) Subsection (1) does not apply in respect of a deposit

• (a) for which the depositor is a nominee broker;
• (b) that is held in an account identified as a professional trustee account; or
• (c) for which the depositor is the member institution.

Nominee Broker Deposits

Information to member institution

6 (1) For the purpose of subparagraph 7(1)(a)(ii) of the schedule to the Act, alphanumeric codes must be assigned in accordance with the following rules:

• (a) a nominee broker must not assign the same code to more than one beneficiary;
• (b) a nominee broker must assign the same code in respect of all of a beneficiary’s deposits made by the nominee broker at the same member institution that are held under the same type of special income arrangement;
• (c) a nominee broker must assign the same code in respect of all of a beneficiary’s deposits made by the nominee broker at the same member institution that are not held under a special income arrangement;
• (d) a nominee broker may assign the same code in respect of the beneficiary’s deposits that are held under different types of special income arrangement or under no such arrangement.

Other information

(2) For the purpose of subparagraph 7(1)(a)(iv) of the schedule to the Act, the nominee broker must provide the following information to the member institution:

• (a) the nominee broker’s legal name;
• (b) the type of special income arrangement under which the deposit is held or an indication that the deposit is not held under any special income arrangement;
• (c) if the deposit is held under a special income arrangement, the alphanumeric code, assigned in accordance with the following rules, for each individual for whose benefit the arrangement is established, along with an indication that the code is assigned for the purposes of this paragraph:
  • (i) a nominee broker must not assign the same code to more than one individual,
  • (ii) a nominee broker must assign the same code to an individual in respect of all deposits made by the nominee broker at the same member institution that are held for the individual’s benefit under the same type of special income arrangement,
  • (iii) a nominee broker may assign the same code to an individual in respect of deposits that are held for the individual’s benefit under different types of special income arrangement.

Same code as beneficiary and individual

(3) A nominee broker must assign the same alphanumeric code under subsection (1) and paragraph (2)(c) to a person who is both a beneficiary of a deposit that is held under a special income arrangement and an individual for whose benefit a deposit is held under the same type of special income arrangement at the same member institution.

Records of member institution

7 (1) For the purpose of subsection 6(1) of the schedule to the Act, if the deposit is a nominee broker deposit, the trusteeship must be disclosed on the records of the member institution before the determination date by

• (a) indicating that the deposit is held in trust by a nominee broker; and
• (b) setting out the nominee broker’s legal name and address.

Interest or right of beneficiary

(2) For the purposes of subsection 6(2) of the schedule to the Act, if the deposit is a nominee broker deposit, the trusteeship must be disclosed on the records of the member institution before the determination date by

• (a) indicating that the deposit is held in trust by a nominee broker;
• (b) setting out the nominee broker’s legal name and address; and
• (c) setting out the alphanumeric code assigned to the beneficiary in respect of the deposit in accordance with subsection 6(1).

Interest or right of beneficiary

(3) For the purposes of subsection 6(3) of the schedule to the Act, if the deposit is a nominee broker deposit, a beneficiary’s interest or right in the deposit must be disclosed on the records of the member institution before the determination date by

• (a) indicating that the deposit is held in trust by a nominee broker;
• (b) setting out the nominee broker’s legal name and address;
• (c) setting out the alphanumeric code assigned to the beneficiary in respect of the deposit in accordance with subsection 6(1); and
• (d) setting out the amount or percentage of the interest or right in the deposit associated with that code.

Special income arrangement

8 If a nominee broker deposit is held under a special income arrangement, the type of special income arrangement and each alphanumeric code assigned in relation to it in accordance with paragraph 6(2)(c) must be disclosed on the records of the member institution before the determination date.

Information to Corporation

9 For the purpose of subparagraph 7(1)(b)(iii) of the schedule to the Act, the nominee broker must provide the following information to the Corporation:

• (a) the type of special income arrangement, if any, associated with each alphanumeric code assigned in accordance with subsection 6(1);
• (b) each alphanumeric code assigned in accordance with paragraph 6(2)(c), as well as the name of the individual and the type of special income arrangement associated with it.

Form and manner of providing information

10 The information referred to in paragraph 7(1)(b) of the schedule to the Act must be provided electronically in a format that permits data extraction and manipulation.

Attestation

11 (1) An initial attestation referred to in paragraph 8(1)(b) of the schedule to the Act must

• (a) set out the member institution’s name and the nominee broker’s legal name and mailing address;
• (b) include, if the nominee broker states that they are capable of fulfilling the obligations set out in paragraph 7(1)(b) of the schedule to the Act, a description of the nominee broker’s policies and procedures for ensuring that they are capable of fulfilling those obligations;
• (c) include, if the nominee broker states that they are not capable of fulfilling the obligations set out in paragraph 7(1)(b) of the schedule to the Act, an explanation of why they are not capable and their proposed actions and time frame for remedying the situation;
• (d) be signed by the nominee broker or a senior officer of the nominee broker;
• (e) set out the mailing address, email address and telephone number of the person who signed the attestation and, if the nominee broker is not an individual, of another senior officer of the nominee broker; and
• (f) be sent electronically not later than the 30th day after the day on which the nominee broker becomes a party to the agreement or arrangement that requires the making of the attestation.

Multiple agreements or arrangements

(2) For greater certainty, if an initial attestation is required under more than one agreement or arrangement entered into by a nominee broker within a 30-day period, the nominee broker may make and send to the Corporation, not later than the 30th day after the day on which the first agreement or arrangement is entered into, a single attestation containing the names of all of the member institutions with which the agreements or arrangements are entered into.

Update

(3) An updated attestation referred to in paragraph 8(1)(b) of the schedule to the Act must

• (a) set out the nominee broker’s legal name and mailing address;
• (b) set out the name of each member institution with which the nominee broker has entered into an agreement or arrangement, highlighting any changes since the most recent updated attestation;
• (c) include, if the nominee broker states that they are capable of fulfilling the obligations set out in paragraph 7(1)(b) of the schedule to the Act, a description of the nominee broker’s policies and procedures for ensuring that they are capable of fulfilling those obligations, unless they are unchanged since the nominee broker’s last updated attestation;
• (d) include, if the nominee broker states that they are not capable of fulfilling the obligations set out in paragraph 7(1)(b) of the schedule to the Act, an explanation of why they are not capable and their proposed actions and time frame for remedying the situation;
• (e) be signed by the nominee broker or a senior officer of the nominee broker;
• (f) set out the mailing address, email address and telephone number of the person who signed the attestation and, if the nominee broker is not an individual, of another senior officer of the nominee broker; and
• (g) be sent electronically no later than May 31 of each year, starting in 2022, and within 10 days after any change to the nominee broker’s legal name or to their capability to fulfill the obligations set out in paragraph 7(1)(b) of the schedule to the Act.

Contact information

12 (1) For the purpose of paragraph 8(1)(c) of the schedule to the Act, the contact information that must be provided to the member institution consists of the name, mailing address, email address and telephone number of the nominee broker, if they are an individual, or of two senior officers of the nominee broker.

Update

(2) The contact information must be updated within 10 days after any change to it.

Notice to Corporation

13 (1) For the purpose of subsection 8(3) of the schedule to the Act, the member institution must notify the Corporation electronically, not later than the 15th day after the day on which it enters into an agreement or arrangement, by

• (a) providing the nominee broker’s legal name;
• (b) specifying the day on which the member institution entered into the agreement or arrangement; and
• (c) including a confirmation that the agreement or arrangement includes the provisions required under subsection 8(1) of the schedule to the Act.

End of agreement or arrangement

(2) For the purpose of subsection 8(4) of the schedule to the Act, the member institution must notify the Corporation electronically, not later than the 15th day after the day on which the member institution ceases to be a party to an agreement or arrangement, by

• (a) providing the nominee broker’s legal name; and
• (b) specifying the day on which the member institution ceased to be a party to the agreement or arrangement.

Information to nominee broker

14 For the purpose of subsection 8(5) of the schedule to the Act, the information that the member institution must provide consists of an indication that the nominee broker is not in compliance with paragraph 7(1)(a) of the schedule to the Act and an indication of what information they have failed to provide.

Professional Trustee Accounts

Records of member institution

15 For the purposes of subsections 6(1) and (2) of the schedule to the Act, if the deposit is held in an account identified as a professional trustee account, the trusteeship must be disclosed on the records of the member institution before the determination date by

• (a) indicating that the deposit is held in trust;
• (b) indicating that the account in which the deposit is held is a professional trustee account; and
• (c) setting out the name and address of the professional trustee.

Manner of making attestation

16 For the purpose of paragraph 9(a) of the schedule to the Act, the attestation must be made in writing and be signed by the professional trustee or a senior officer of the professional trustee.

Contact information

17 For the purposes of paragraph 9(b) and subparagraph 11(c)(iii) of the schedule to the Act, the contact information must be provided to the member institution in writing and must include the name, mailing address, email address and telephone number of the professional trustee, if they are an individual, or of a senior officer of the professional trustee.

Provision of information on request

18 (1) For the purpose of paragraph 11(b) of the schedule to the Act, the following information must be provided, as it exists as of the date specified in the Corporation’s request:

• (a) the information referred to in paragraph 11(a) of the schedule to the Act;
• (b) if the deposit is held under a special income arrangement, the type of arrangement and the name and address of the individual for whose benefit the arrangement is established.

Form and manner of providing information

(2) The information must be provided electronically in a format that permits data extraction and manipulation.

Manner of providing attestation

19 The attestation referred to in subparagraph 11(c)(i) of the schedule to the Act must be provided in writing.

Information on removal of designation

20 (1) If a member institution removes, in accordance with paragraph 12(3)(b) of the schedule to the Act, the designation of an account identified as a professional trustee account, the information that the Corporation may, for the purpose of subsection 6(5) of the schedule to the Act, require the member institution to provide to the depositor includes

• (a) the fact that the designation has been removed in accordance with that paragraph; and
• (b) the fact that the designation will be reinstated if the depositor complies with section 9 of the schedule to the Act.

Time and manner

(2) The information must be provided in writing within five days after the day on which the designation is removed.

Repeal

21 The Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-Law ^{footnote 1} is repealed.

Coming into Force

S.C. 2018, c. 12

22 This By-law comes into force on the day on which section 212 of the Budget Implementation Act, 2018, No. 1 comes into force.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the By-law.)

Background

The schedule to the Canada Deposit Insurance Corporation Act (the Act) provides that deposits held jointly and deposits held in trust for another person receive insurance coverage separate from another deposit a person may have in his or her own name if the requirements established in the schedule to the Act and associated by-law are met. To assess insurance coverage, the Canada Deposit Insurance Corporation (CDIC or the Corporation) relies on the information about the deposits and depositors available at the member institution at the time of failure. Therefore, to reimburse insured deposits at the time of failure, information on the identity of the depositor, the deposit insurance category of the deposit, and the amount owed to the depositor must be disclosed on the records of the member institution. When a deposit is held in trust, disclosing the identity of the beneficiaries and their beneficial interest in the deposit is also necessary.

The current Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-Law (CDIC Joint and Trust Account Disclosure By-law) prescribes the information to be disclosed on the records of a member institution for a deposit to receive separate insurance coverage, either as a jointly held deposit or as a deposit held in trust for another person for the purposes of subsections 3(1) to (3) of the schedule to the Act. The information prescribed in the CDIC Joint and Trust Account Disclosure By-law ensures that the Corporation has the information it needs to determine coverage.

The Canadian financial marketplace for trust deposits has changed significantly since the disclosure requirements for trust deposits were established in 1995. While minor amendments were made to the CDIC Joint and Trust Account Disclosure By-law in 2006, 2009 and 2011, the disclosure requirements were not changed. Since then, brokers acting as a nominee for their clients now play a significant role in placing deposits at CDIC’s member institutions. Similarly, professional firms hold large sums of money on behalf of clients.

In response to those changes in the trust marketplace, the schedule to the Act was amended through the Budget Implementation Act 2018, No. 1, Part 6, Division 2. These amendments will come into force on April 30, 2021. While the general requirements under the schedule to the Act for a deposit to be considered in trust for a beneficiary have not changed, the requirements for nominee broker deposits and deposits held in professional trustee accounts have been adapted to contribute to the protection of depositors and to promote financial stability. The Canada Deposit Insurance Corporation Co-owned and Trust Deposit Disclosure By-law (the By-law) would repeal the CDIC Joint and Trust Account Disclosure By-law and provide the supporting details to the new requirements of the legislation. The By-law would come into force on April 30, 2021, to align with the new legislative requirements.

Objectives

The By-law prescribes the information to be disclosed on the records of a member institution in order for CDIC to determine insurance coverage and facilitate the reimbursement of insured deposits as quickly as possible following the failure of a member institution as a way to promote financial stability at a time of financial uncertainty.

Description

The following table provides more details about the amendments in the By-law.

By-law section	Explanation
1	Provides definitions for terms used throughout the By-law.
2	Prescribes the information to be disclosed on the records of a member institution for a co-owned deposit.
3	Prescribes the information to be disclosed on the records of a member institution for a deposit held in trust for another person when the trustee is not a nominee broker and the deposit is not made in a professional trustee account. The first subsection prescribes the trusteeship requirements, the second prescribes additional trusteeship requirements to extend coverage to the beneficiary when a deposit has only one beneficiary, while the third prescribes additional trusteeship requirements to extend coverage to the beneficiary and how the interest of each beneficiary is to be disclosed when a trust deposit has more than one beneficiary.
4	Prescribes the information to be disclosed on the records of a member institution for a trust deposit received under a special income arrangement when the depositor is not a nominee broker or the deposit is not made in a professional trustee account.
5	Prescribes the information the Corporation may require a member institution to provide to a depositor and the timing and manner for providing such information.
6	Prescribes the rules a nominee broker must follow when assigning an alphanumeric code and specifies the additional information a nominee broker has to provide to the member institution at the time the deposit is made and each time a change is made to the deposit.
7	Prescribes the trusteeship information to be disclosed on the records of a member institution for a nominee broker deposit and timing for disclosure.
8	Prescribes the information to be disclosed on the records of a member institution for a nominee broker deposit received under a special income arrangement and timing for disclosure.
9	Prescribes the additional information nominee brokers must send to the Corporation when requested.
10	Prescribes the form and manner of the information a nominee broker would be required to provide to the Corporation upon request as per paragraph 7(1)(b) of the schedule to the Act.
11	Prescribes the information the initial and updated attestation referred to in paragraph 8(1)(b) of the schedule to the Act must include and the timing and manner for sending the attestation to the Corporation.
12	Prescribes the contact information a nominee broker must provide to the member institution and the timing for updating it.
13	Prescribes the information a member institution must include in the notification to the Corporation when entering or terminating an agreement with a nominee broker, and the manner and timing for sending the notification.
14	Prescribes the information a member institution must provide to a nominee broker who is not complying with the requirements set under paragraph 7(1)(a) of the schedule to the Act.
15	Prescribes the trusteeship information to be disclosed on the records of a member institution for a trust deposit made in a professional trustee account.
16	Prescribes the manner for a professional trustee to attest of its status of being a professional trustee.
17	Prescribes the contact information of a professional trustee and manner for providing the contact information to the member institution.
18	Prescribes the information a professional trustee must send to the Corporation upon request and the form and manner of providing the information.
19	Prescribes the manner in which a professional trustee must provide the attestation referred to in subparagraph 11(c)(i) of the schedule to the Act.
20	Prescribes the information the Corporation may require a member institution to provide to professional trustees when a professional trustee account designation is removed and the manner and timing of providing such information.
21	Repeals the current CDIC Joint and Trust Account Disclosure By-law.
22	Prescribes the coming-into-force date of the By-law.

“One-for-One” Rule

The “One-for-One” Rule does not apply, as the change in administrative costs to business is negligible.

Small business lens

The small business lens does not apply, as there are no costs to small businesses.

Alternatives

There are no available alternatives. The amendments must be done by way of by-law.

Consultation

CDIC has consulted extensively on the changes to the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-law. Furthermore, the By-law was published in Part I of the Canada Gazette on May 25, 2019, for a 30-day consultation period. Comments received consisted mainly in clarification of the legislation and the By-law. The most substantive comment was with respect to the level of seniority required from nominee brokers for signing the annual attestation regarding their capacity to fulfill certain obligations of the legislation. To protect depositors and promote financial stability, it was decided that it was appropriate to maintain a high level of seniority for the attestation. Only very minor changes reflecting drafting convention language have been made to the By-law since prepublication.

Rationale

The By-law prescribes the information to be disclosed on the records of a member institution for a depositor to receive separate insurance coverage for deposits co-owned and for deposits held in trust for another person under the new legislative framework brought forward through section 212 of the Budget Implementation Act 2018, No. 1, Part 6, Division 2, which will come into force on April 30, 2021. This information is necessary for the Corporation to determine the insurance coverage in an accurate and timely manner at the time of failure.

Compliance and enforcement

The By-law comes into force on the day on which section 212 of the Budget Implementation Act 2018, No. 1, Part 6, Division 2, comes into force, which is April 30, 2021. There are no compliance or enforcement issues.

Contact

Annie Hardy
Director
Policy
Canada Deposit Insurance Corporation
50 O’Connor Street, 17th Floor
Ottawa, Ontario
K1P 6L2
Telephone: 613‑943‑2751
Email: ahardy@cdic.ca