Vol. 144, No. 28 — July 10, 2010

By-law Amending the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure
By-law

Statutory authority

Canada Deposit Insurance Corporation Act

Sponsoring agency

Canada Deposit Insurance Corporation

REGULATORY IMPACT
ANALYSIS STATEMENT

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

Description

The Board of Directors of the Canada Deposit Insurance Corporation (“CDIC”) made the Joint and Trust Account Disclosure By-law (the “By-law”) on June 6, 1995, pursuant to paragraph 11(2)(g) of the Canada Deposit Insurance Corporation Act (CDIC Act) and subsection 3(3.1) of the Schedule to the CDIC Act. Paragraph 11(2)(g) provides that the CDIC Board of Directors may make by-laws prescribing anything that by virtue of any provision of the CDIC Act is to be prescribed by the by-laws and subsection 3(3.1) of the Schedule to the CDIC Act provides that the Board may make by-laws prescribing the time by which and the form and manner in which a joint interest, a trusteeship or the interest of a beneficiary in a deposit is to be disclosed on the records of a member institution for the purposes of subsections (1) to (3) of section 3 of the Schedule to the CDIC Act. The CDIC Board of Directors subsequently made a technical amendment to the French version only of section 3 of the By-law on April 5, 2000, and again amended the By-law to address a tech-nical anomaly on June 3, 2009.

A comprehensive review of the By-law to ensure that it remains up-to-date, relevant and supportive of initial goals was undertaken during 2009 and 2010. The purpose of the By-law is to ensure member institutions’ records contain sufficient information to enable the CDIC to make timely determinations of insured joint and trust deposits in the event of a member institution failure. This involves assurance that accurate aggregation by depositor and insurance category can take place at any point in time. In suggesting the following changes, the CDIC has sought a balance between obtaining more information and imposing obligations that would require significant systems changes or considerable operational challenges for members. There are also some technical or clarifying amendments being proposed.

The proposed changes are contained in the By-law Amending the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-law (the “Amending By-law”). The substantive amendments are in subsection 4(2), section 5, subsection 6(2) and section 7 of the Amending By-law which introduce amendments to sections 6 and 7 and add sections 6.1 and 8.1 to the By-law. Technical amendments are reflected in sections 1, 2, 3, and subsections 4(1) and 6(1) of the Amending By-law that amend the introductory language to each of sections 3, 4, and 5, and subsections 6(1) and 7(1) of the By-law such that the language better reflects where disclosed information is to be recorded.

The changes are summarized in the following table:

Section of Amending By-law	Section of By-law Changed	Explanation
1	3	Technical — Amends the introductory language to section 3 such that it better reflects where disclosed information is to be recorded and confirms that member institutions must include disclosed information in their records.
2	4	Technical — Amends the introductory language to section 4 such that it better reflects where disclosed information is to be recorded and confirms that member institutions must include disclosed information in their records.
3	5	Technical — Amends the introductory language to section 5 such that it better reflects where disclosed information is to be recorded and confirms that member institutions must include disclosed information in their records.
4(1)	6(1)	Technical — Amends the introductory language to subsection 6(1) such that it better reflects where disclosed information is to be recorded and confirms that member institutions must include disclosed information in their records.
4(2)	6(2)	Substantive — The timing of the required annual disclosure will not change. The draft amendment to subsection 6(2) permits updating or new disclosure at any time prior to the time of failure of an institution. Previously, errors or non-disclosure could only be corrected at the time of the next annual disclosure (i.e. during May of each year).
5	New 6.1	Substantive — (1) During the month of April in each year, member institutions will be required to remind trustee-depositors of their annual disclosure requirements including advising them where the information is to be sent. (2) The reminder is to be sent by regular or electronic mail to the address of the depositor set out in the member institution’s records.
6(1)	7(1)	Technical — Amends the introductory language to subsection 7(1) such that the language is consistent with the changes being made to the introductory language in section 5 and subsection 6(1).
6(2)	7(1)(e) and new 7(1)(f)	Substantive — Additional trustee depositors are being permitted to use alphanumeric identifiers to record the names and addresses and beneficial interests of beneficiaries of the trust pursuant to section 7. Paragraph 7(1)(e) of the By-law extends this privilege to a trustee depositor that is not prohibited from holding the monies in trust (rather than one that is required to hold the monies in trust). Paragraph 7(1)(f) is added to include regulated federal or provincial trust companies when acting as a trustee-depositor with a member.
7	New 8.1	Substantive — Obligates trustees to update the disclosed information within 20 business days after an institution failure. Without this new section, the CDIC has discretion under section 8 to refuse to update information about beneficiaries.

Alternatives

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

Benefits and costs

The implementation of the Amending By-law will provide benefits to member institutions and trustee depositors in a number of ways. It will enlarge the pool of trustees that can take advantage of the use of alphanumeric identifiers in lieu of delivering lengthy information about beneficiaries. It will also provide depositors with a more readily available mechanism to remedy previous errors or omissions in disclosure. No costs should be attributed directly to these changes. Trustee depositors will also benefit from the reminder to appropriately disclose the interest of beneficiaries that is to be sent by member institutions. There will be a cost to member institutions to implement the yearly notification to trustee depositors.

The CDIC will benefit from the improved disclosure in the event of the failure of a member institution and the necessity to conduct an insurance determination.

Consultation

The CDIC regularly conducts comprehensive reviews of its by-laws. In April 2009, the CDIC issued a consultation paper focusing on the disclosure requirements that must be met in order for trust and/or joint deposits to enjoy deposit insurance coverage separate from the depositor’s basic coverage. Comments were initially requested by June 30, 2009, but this date was extended to the end of September 2009 at the request of the Canadian Bankers Association. A further paper was issued in March 2010 that included a summary of the comments received as well as a draft of the Amending By-law. Comments were requested by June 15, 2010. No changes to the proposed Amending By-law were needed as a result of comments received.

Consultation by way of pre-publication in the Canada Gazette, Part I, is the final phase of the CDIC consultation process.

Compliance and enforcement

During the month of April in each year, member institutions will be required to remind trustee-depositors of their annual disclosure requirements. The primary concern expressed by the members related to evidencing compliance with the requirement. The provision has been drafted in such a way that compliance can be achieved simply with evidence that the reminder has been sent without any necessity to track receipt by each trustee-depositor.

Contact

Sandra Chisholm
Director, Insurance
Canada Deposit Insurance Corporation
50 O’Connor Street, 17th Floor
P.O. Box 2340, Station D
Ottawa, Ontario
K1P 5W5
Telephone: 613-943-1976
Fax: 613-992-8219
Email: schisholm@cdic.ca

PROPOSED REGULATORY TEXT

Notice is hereby given that the Board of Directors of the Canada Deposit Insurance Corporation, pursuant to paragraphs 11(2)(a) and (g) (see footnote a) of the Canada Deposit Insurance Corporation Act (see footnote b) and subsection 3(3.1) (see footnote c) of the schedule to that Act, proposes to make the annexed By-law Amending the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-law.

Interested persons may make representations concerning the proposed By-law within 60 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Sandra Chisholm, Director, Insurance, Canada Deposit Insurance Corporation, 50 O’Connor Street, 17th Floor, Ottawa, Ontario K1P 5W5 (e-mail: schisholm@cdic.ca).

Ottawa, June 25, 2010

MICHÈLE BOURQUE
President and Chief Executive Officer
Canada Deposit Insurance Corporation

BY-LAW AMENDING THE CANADA DEPOSIT
INSURANCE CORPORATION JOINT AND TRUST
ACCOUNT DISCLOSURE BY-LAW

AMENDMENTS

1. The portion of section 3 of the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-Law (see footnote 1) before paragraph (a) is replaced by the following:

3. For the purposes of subsection 3(1) of the schedule, a depositor that is acting as joint owner with another must, before the determination date, disclose the following information for inclusion in the records of the member institution:

2. The portion of section 4 of the By-law before paragraph (a) is replaced by the following:

4. For the purposes of subsections 3(1) and (2) of the schedule, a depositor that is acting as trustee for a beneficiary must, before the determination date, disclose the following information for inclusion in the records of the member institution:

3. Section 5 of the By-law is replaced by the following:

5. Subject to subsection 7(1), for the purposes of subsection 3(2) of the schedule, a depositor that is acting as trustee for a beneficiary must, before the determination date, disclose the name and address of the beneficiary for inclusion in the records of the member institution.

4. (1) The portion of subsection 6(1) of the By-law before paragraph (a) is replaced by the following:

6. (1) For the purposes of subsection 3(3) of the schedule, a depositor that is acting as trustee for two or more beneficiaries must disclose the following information for inclusion in the records of the member institution:

(2) Subsection 6(2) of the By-law is replaced by the following:

(2) A depositor may remedy a failure to disclose the information referred to in paragraph (1)(b) in respect of a particular year within the time required by that paragraph by disclosing, at any time before the determination date, the required information as of April 30 preceding the day on which it is disclosed.

5. The By-law is amended by adding the following after section 6:

6.1 (1) During the month of April in each year, every member institution must notify in writing all of its depositors that have disclosed the information referred to in subparagraph 6(1)(a)(i) that they are also required to disclose the information referred to in paragraph 6(1)(b) within the time required by that paragraph and must indicate where that information is to be sent.

(2) The notification referred to in subsection (1) must be sent by the member institution by regular or electronic mail to the address of the depositor, as set out in the records of the member institution.

6. (1) The portion of subsection 7(1) of the By-law before paragraph (a) is replaced by the following:

7. (1) The information referred to in section 5 and subparagraph 6(1)(a)(ii) is not required to be disclosed for inclusion in the records of the member institution if the information described in subsection (2) is disclosed in its place and the deposit is held in trust by

(2) Subsection 7(1) of the By-law is amended by striking out “or” at the end of paragraph (d) and by replacing paragraph (e) with the following:

(e) a person who is acting as a trustee of moneys for others in the course of business and is subject to the rules of a securities commission, stock exchange or other regulatory or self-regulating organization that audits compliance with those rules; or

(f) a regulated federal or provincial trust company acting in the capacity of a depositor.

7. The By-law is amended by adding the following after section 8:

8.1 A depositor who has disclosed the information referred to in any of sections 3 to 6 must, if the information has changed since it was disclosed, provide the Corporation with an update of that information within 20 days after the determination date.

COMING INTO FORCE

8. This By-law comes into force on January 1, 2011.

[28-1-o]

Footnote a
R.S., c. 18 (3rd Supp.), s. 51

Footnote b
R.S., c. C-3

Footnote c
R.S., c. 18 (3rd Supp.) s. 73(2)

Footnote 1
SOR/95-279

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