Canada Gazette, Part I, Volume 153, Number 26: By-law Amending the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-Law

June 29, 2019

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.)

Background

The Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-law (the 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 Canada Deposit Insurance Corporation Act (CDIC Act). The information prescribed in the Joint and Trust Account Disclosure By-law ensures that the Canada Deposit Insurance Corporation (CDIC) has the information it needs to determine coverage at the time of failure of a member institution.

The Canadian financial marketplace for trust deposits has changed significantly since the disclosure requirements for trust deposits were established in 1995. The Joint and Trust Account Disclosure By-law has only been modified in 2006, 2009 and 2011 with minor amendments where 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 in trust for clients.

In response to those changes in the trust marketplace, the schedule to the CDIC Act, which establishes coverage for jointly held deposits and trust deposits, was amended through the Budget Implementation Act, 2018, No. 1, Part 6, Division 2. To complement the changes to the schedule, the new Canada Deposit Insurance Corporation Co-owned and Trust Deposit Disclosure By-law was published in the Canada Gazette, Part I, on May 25, 2019, for a 30-day comment period. The new By-law clarifies and strengthens the information that must appear on the records of member institutions in order for beneficiaries to receive separate coverage under the trust deposit category and provide CDIC with new powers to foster disclosure compliance of nominee brokers. If approved, the new By-law will come into force on April 30, 2021.

On the leading-up to the development of the new Co-owned and Trust Deposit Disclosure By-law, CDIC held public consultations with many stakeholders. During those consultations, stakeholders have raised concerns with respect to certain aspects of the Joint and Trust Account Disclosure By-law. To facilitate the transition to this new framework and address some of these concerns, CDIC proposes to amend the current Joint and Trust Account Disclosure By-law to extend the timing for beneficiary information of a trust deposit to be disclosed on the records of member institutions in the event of failure. This will ensure that CDIC has all the information needed to support the determination and payment of insured deposits held in trust in order to continue to protect depositors and promote the stability of the financial system in Canada.

Objective

The By-law Amending the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-Law (the Amending By-law) extends to 90 days after the determination date the timing for the beneficiary information of a trust deposit to be disclosed on the records of a member institution. The proposed changes would allow trustees to update or amend beneficiary information 90 days following failure so that CDIC has the information needed to support the payment of insured deposits held in trust.

CDIC proposes that the Amending By-law would come into force as soon as it is registered and will be in effect until the new trust deposit rules take effect on April 30, 2021.

Description

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

Amending By-law Section

Explanation

1

Changes the wording of section 3 of the By-law per regulation drafting convention.

2

Changes the wording of section 4 of the By-law per regulation drafting convention.

3

Amends the timing of section 5 of the By-law for disclosing the beneficiary information to no later than 90 days after the determination date and specifies that the information must be as at the determination date.

4

Amends the timing of subsections 6(1) and 6(2) of the By-law for disclosing the beneficiary information to no later than 90 days after the determination date and specifies that if the information is provided after the determination date, the information must be as of the determination date.

5

Amends subsection 6.1(1) of the By-law to limit the requirement for member institutions to send an annual letter to the depositors before the determination date.

6

Changes the wording of subsections 7(1) and 7(2) of the By-law per regulation drafting convention.

7

Amends section 8.1 of the By-law to change the timing for updating previously disclosed information to no later than 90 days after the determination date and specifies that the information must be as at the determination date.

8

Prescribes the coming-into-force date.

“One-for-One” Rule

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

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

In 2018, CDIC undertook a public consultation, including targeted consultations with several member institutions, trustees and nominee brokers on the elements of the CDIC Joint and Trust Account Disclosure By-law and implication of a new legislative framework. During those consultations, certain aspects of the CDIC Joint and Trust Account Disclosure By-law were raised by stakeholders. Feedback from industry was considered and led to the development of the Amending By-law.

Rationale

The Amending By-law changes the timing by which certain information has to be disclosed on the records of a member institution for a depositor to receive separate insurance coverage for deposits jointly held and for deposits held in trust for another person. The proposed changes would allow trustees to update or amend beneficiary information 90 days following failure so that CDIC has all information needed to support the determination and payment of insured deposits held in trust.

Compliance and enforcement

The Amending By-law comes into force on the day it is registered. 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

PROPOSED REGULATORY TEXT

Notice is given that 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 subsection 3(3.1) 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 30 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 Annie Hardy, Director, Policy, Canada Deposit Insurance Corporation, 50 O’Connor Street, 17th Floor, Ottawa, Ontario K1P 6L2 (email: ahardy@cdic.ca).

Ottawa, June 24, 2019

Peter Routledge
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 footnote 1 before paragraph (b) is replaced by the following:

3 For the purposes of subsection 3(1) of the schedule, if a depositor is acting as joint owner with another, the following information must be disclosed on the records of the member institution before the determination date:

2 Section 4 of the By-Law is replaced by the following:

4 For the purposes of subsections 3(1) and (2) of the schedule, if a depositor is acting as trustee for another, the following information must be disclosed on the records of the member institution before the determination date:

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, the beneficiary’s name and address must be disclosed on the records of the member institution not later than the 90th day after the determination date.

4 (1) The portion of subsection 6(1) of the ByLaw before paragraph (b) is replaced by the following:

6 (1) For the purposes of subsection 3(3) of the schedule, the following information must be disclosed on the records of the member institution:

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

(2) 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 may be remedied by disclosing on the records of the member institution,

5 Subsection 6.1(1) of the By-Law is replaced by the following:

6.1 (1) If the information referred to in subparagraph 6(1)(a)(i) has been disclosed on the records of a member institution in respect of a deposit, the member institution must, during each month of April until the determination date, notify the depositor in writing that the information referred to in paragraph 6(1)(b) must be disclosed on the records of the member institution within the time required by that paragraph and must indicate where the depositor must send the information for disclosure on the records of the member institution.

6 (1) The portion of subsection 7(1) of the ByLaw 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 on the records of the member institution if the information referred to in subsection (2) is disclosed in its place and the deposit is held in trust by

(2) The portion of subsection 7(2) of the French version of the By-Law before paragraph (a) is replaced by the following:

(2) Pour l’application du paragraphe (1), les renseignements à indiquer dans les registres de l’institution membre consistent en un code alphanumérique ou autre identificateur distinct, pour chacun des bénéficiaires, qui figure dans les registres du déposant où se trouve un relevé à jour :

7 Section 8.1 of the By-Law is replaced by the following:

8.1 If any information referred to in sections 3 to 6 has changed since it was disclosed on the records of the member institution, updated information as of the determination date must be disclosed on the records of the member institution within 90 days after that date.

Coming into Force

8 This By-Law comes into force on the day on which it is registered.