Protection of Assets (Trust and Loan Companies) Regulations (SOR/92-350)

Short Title

1 These Regulations may be cited as the Protection of Assets (Trust and Loan Companies) Regulations.

Interpretation

2 In these Regulations,

bond

bond means a contract of insurance by which one party agrees to indemnify another party for loss arising out of the act of a third party; (caution)

security

security, in respect of a company, means a negotiable security owned or held by the company or held by the company in trust, but does not include a security issued by the company; (titre)

security transaction

security transaction means a purchase, sale, redemption, exchange, transfer or assignment of, or other transaction in respect of, a security. (opération sur titres)

Application

3 These Regulations do not apply to a company

• (a) that is carrying on business in a jurisdiction in compliance with a law of that jurisdiction, to the extent that that law is inconsistent with these Regulations; or

• (b) to the extent that they are inconsistent with

  • (i) a power conferred or a duty imposed on the company in respect of the administration of an estate or trust, or

  • (ii) the discharge of the company’s responsibilities in acting as an agent.

Safeguarding of Assets

4 A company shall

• (a) maintain a record in writing of procedures to be followed in the handling and safeguarding of assets owned or held by the company; and

• (b) inform every director, officer, employee and agent of the company who has access to, or is involved in the handling and safeguarding of, assets owned or held by the company of those procedures.

Safeguarding of Securities

5 A company shall maintain an up-to-date record that identifies every security.

• 6 (1) Subject to subsection (2) and section 7, a company shall ensure that every security is kept securely, in a manner that prevents unauthorized access to the security, in the custody of

  • (a) the company; or

  • (b) an entity that is authorized to act as a custodian of securities or as a depository or clearing agency for securities by a law of the jurisdiction in which the entity is carrying on business.

• (2) Subsection (1) does not apply in respect of a security that is

  • (a) under the control of the government of a jurisdiction in which the company is carrying on business;

  • (b) pledged as collateral for the indebtedness or potential indebtedness of the company;

  • (c) loaned to a person pursuant to a written agreement; or

  • (d) in transit.

7 A company shall not place a security in the custody of an entity referred to in paragraph 6(1)(b) unless the company has entered into a written custodial agreement with that entity.

8 A company shall, on a daily basis, deposit any net amount received by the company as a result of any security transaction in an account kept by the company

• (a) in the company;

• (b) with a financial institution that is authorized to accept deposits by a law of the jurisdiction where the financial institution is carrying on business;

• (c) with a trust company that is authorized to hold money in trust by a law of the jurisdiction where the trust company carries on business;

• (d) with the government of the jurisdiction in which the company is carrying on business, or with an agency thereof that is authorized to act as a custodian of securities; or

• (e) with CDS Clearing and Depository Services Inc.

Registration of a Security

• 9 (1) Subject to subsections (2) and (3), a company shall ensure that every security is registered in the company’s name in the register of the entity that issued the security.

• (2) Subsection (1) does not apply in respect of a security that

  • (a) cannot be registered in the company’s name for any reason that is beyond the control of that company;

  • (b) is under the control of the government of a jurisdiction in which the company is carrying on business;

  • (c) is held by the company as collateral or for safekeeping;

  • (d) is registered in the name of a nominee of the company or of an entity referred to in paragraph 6(1)(b);

  • (e) is held under a book entry certificateless or immobilization system; or

  • (f) is held temporarily by an agent of the company, a liquidator, a trustee or the issuer of the security for purposes of reorganization, amalgamation, liquidation or voting.

• (3) Where a security is otherwise protected against loss, fraud, theft and destruction, the company may hold the security

  • (a) in bearer form; or

  • (b) in registered form in a name other than the company’s name.

Bonding and Insurance

• 10 (1) A company shall acquire and at all times maintain one or more bonds issued by an entity authorized to insure risks under the laws of the jurisdiction in which the entity carries on business to indemnify the company for any loss in respect of assets owned or held by that company arising out of a dishonest or criminal act of an officer or employee of that company.

• (2) A company shall, in respect of assets owned or held by the company, acquire and at all times maintain one or more insurance policies to indemnify that company for loss arising out of damage to, or the destruction or mysterious disappearance of, those assets or out of any other usual contingency.

11 A bond or an insurance policy acquired and maintained in accordance with section 10 shall provide that the bond or insurance policy shall not be cancelled or terminated by the insurer or the insured until at least 30 days after the receipt by the Superintendent of a written notice from the insurer or the insured, as the case may be, of its intention to cancel or terminate the bond or insurance policy.

12 A bond or an insurance policy acquired and maintained in accordance with section 10 shall be in an amount that is established by the directors of the company, having regard to

• (a) the nature and value of the assets owned or held by the company;

• (b) the arrangements and procedures applicable to the handling and safeguarding of the assets owned or held by the company; and

• (c) any other factors that might affect the extent of any loss that the company might sustain.