Pooled Registered Pension Plans Regulations (SOR/2012-294)

Exemptions — subsection 7(1) of the Act

Marginal note:Exempt provisions

6.3 Sections 5, 7, 14 and 16 and subsections 20(3) and (4) of the Multilateral Agreement Respecting Pooled Registered Pension Plans and Voluntary Retirement Savings Plans are exempt from the application of subsection 7(1) of the Act.

Licensing

Marginal note:Prescribed conditions

7 For the purposes of subsection 11(1) of the Act, the Superintendent may, on application, issue a licence authorizing a corporation to be an administrator if

• (a) the corporation submits to the Superintendent a five-year business plan that includes

  • (i) the reasons why the corporation believes that the PRPPs that it intends to administer will be sustainable over the course of the business plan,

  • (ii) the number of plans that the corporation intends to have registered as PRPPs,

  • (iii) a description of how the corporation intends to meet the requirement to provide the PRPPs to its members at low cost, and

  • (iv) an estimate of the costs and of the fees, levies and other charges that would be triggered by the actions of a member;

• (b) the corporation has the financial resources required for the administration of a PRPP;

• (c) the corporation has procedures in place that are sufficient to identify, manage and control the risks associated with the PRPPs;

• (d) the corporation has the operational capability to administer a PRPP;

• (e) the officers and directors of the corporation are of good character, having demonstrated honesty, integrity and ethical behaviour in all of their professional activities; and

• (f) the corporation provides, on the request of the Superintendent, any document or information required to assess whether the corporation meets the conditions set out in paragraphs (b) to (e).

Permitted Investments

Marginal note:Permitted investments

• 8 (1) Every PRPP must provide that the funds in a member’s account are to be

  • (a) invested in accordance with sections 9 to 14; and

  • (b) invested

    • (i) in a name that clearly indicates that the investment is held in trust for the PRPP and, if the investment is capable of being registered, registered in that name,

    • (ii) in the name of a financial institution, or a nominee of it, in accordance with a custodial agreement or trust agreement that is entered into on behalf of the PRPP with the financial institution and that clearly indicates that the investment is held for the PRPP, or

    • (iii) in the name of CDS Clearing and Depository Services Inc., or a nominee of it, in accordance with a custodial agreement or trust agreement that is entered into on behalf of the PRPP with a financial institution and that clearly indicates that the investment is held for the PRPP.

• Marginal note:Custodial agreement

  (2) For the purposes of subsection (1), a custodial agreement must provide that an investment made or held on behalf of a PRPP under the agreement does not constitute an asset of the custodian or nominee.

Marginal note:10% limit

• 9 (1) The administrator of a PRPP must not, directly or indirectly, invest more than 10% of the total market value of the funds in a member’s account in, or lend more than 10% of the total market value of the funds in a member’s account to

  • (a) any one person;

  • (b) associated persons; or

  • (c) affiliated corporations.

• Marginal note:Exception

  (2) Subsection (1) does not apply in respect of the funds in a member’s account that are held by a bank, trust company or other financial institution to the extent that the funds are fully insured by the Canada Deposit Insurance Corporation, by Assuris or by any similar provincial body established for the purpose of providing insurance against loss of deposits with trust companies or other financial institutions.

• Marginal note:Exception

  (3) Subsection (1) does not apply to investments

  • (a) in a mutual fund, a pooled fund or a segregated fund that meets the requirements applicable to a PRPP that are set out in section 10;

  • (b) in an unallocated general fund of a person that is authorized to carry on a life insurance business in Canada;

  • (c) that are made in accordance with sections 12 to 14 of Schedule III to the Pension Benefits Standards Regulations, 1985;

  • (d) in securities issued or fully guaranteed by the Government of Canada, the government of a province, or an agency of either one of them;

  • (e) in a fund composed of mortgage-backed securities that are fully guaranteed by the Government of Canada, the government of a province, or an agency of either one of them;

  • (f) in a fund that replicates the composition of a widely recognized index of a broad class of securities that are traded at a marketplace; or

  • (g) that involve the purchase of a contract or agreement in respect of which the return is based on the performance of a widely recognized index of a broad class of securities traded at a marketplace.

Marginal note:Voting shares

• 10 (1) The administrator of a PRPP must not, directly or indirectly, invest the assets of the PRPP in the securities of a corporation to which are attached more than 30% of the votes that may be cast to elect the directors of the corporation.

• Marginal note:Exception

  (2) Subsection (1) does not apply to investments that are made in accordance with sections 12 to 14 of Schedule III to the Pension Benefits Standards Regulations, 1985.

• Marginal note:Transaction

  (3) For the purposes of sections 11 to 13, “transaction” includes

  • (a) the making of an investment in securities;

  • (b) the taking of an assignment of, or otherwise acquiring, a loan made by a third party;

  • (c) the taking of a security interest in securities or a hypothec on securities; and

  • (d) any modification, renewal or extension of a prior transaction.

    It does not include the making of a variable payment, the transfer of funds into a member’s account or the withdrawal of funds from a member’s account.

Marginal note:Related party transactions

11 For the purposes of sections 12 and 13,

• (a) if a transaction is entered into by, or on behalf of, a PRPP with a person who the administrator of the PRPP, or any person acting on the administrator’s behalf, knows will become a related party to the PRPP, the person is considered to be a related party of the PRPP in respect of the transaction; and

• (b) the fulfilment of an obligation under the terms of any transaction, including the payment of interest on a loan or deposit, is part of the transaction and not a separate transaction.

Marginal note:Prohibition — related party

• 12 (1) Subject to sections 13 and 14, the administrator of a PRPP must not, directly or indirectly,

  • (a) lend funds in a member’s account to a related party or invest those funds in the securities of a related party; or

  • (b) enter into a transaction with a related party on behalf of the PRPP.

• Marginal note:12-month period

  (2) Subject to sections 13 and 14, during the period of 12 months after the day on which a person ceases to be a related party of a PRPP, the administrator of the PRPP must not, directly or indirectly,

  • (a) lend funds in a member’s account to that person or invest those funds in the securities of that person; or

  • (b) enter into a transaction with that person on behalf of the PRPP.

Marginal note:Exception — services of a related party

• 13 (1) The administrator of a PRPP may engage the services of any related party for the operation or administration of the PRPP under terms and conditions that are not less favourable than those, including those relating to price, rent or interest rate, that would apply to a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm’s length and acting prudently, knowledgeably and willingly.

• Marginal note:Exception — securities of a related party

  (2) The administrator of a PRPP may invest in the securities of a related party that are

  • (a) held by a mutual fund, a pooled fund or a segregated fund

    • (i) that meets the requirements applicable to a PRPP that are set out in section 10, and

    • (ii) in which investors other than the administrator and its affiliates may invest and are invested;

  • (b) held by a fund that replicates the composition of a widely recognized index of a broad class of securities traded at a marketplace; or

  • (c) issued or fully guaranteed by the Government of Canada, the government of a province or an agency of either one of them.

Marginal note:Non-application

14 Sections 9 to 13 do not apply in respect of

• (a) investments in a corporation that are held by, or on behalf of, a PRPP as a result of an arrangement, within the meaning of subsection 192(1) of the Canada Business Corporations Act, for the reorganization or liquidation of the corporation or for the amalgamation of the corporation with another corporation, if the investments are to be exchanged for shares or debt obligations; or

• (b) assets that are acquired by, or on behalf of, a PRPP through the realization of a security interest or a hypothec held by, or on behalf of, the PRPP and that are held for a period not exceeding two years after the day on which the assets were acquired.

Investment Choices

Marginal note:Default option — prescribed period

15 For the purposes of subsection 23(3) of the Act, if a member does not make an investment choice referred to in subsection 23(1) of the Act within 60 days after the day on which the notice referred to in paragraph 41(2)(a) of the Act is received, the investment option chosen by the administrator as the default option will apply to the member’s account.

Marginal note:Default option

• 16 (1) An administrator of a PRPP must offer the same default option for all of the PRPPs that it administers.

• Marginal note:Default option — investments

  (2) The default option must be

  • (a) a balanced fund; or

  • (b) a portfolio of investments that takes into account a member’s age.

Marginal note:Investment options

17 The administrator of a PRPP must provide

• (a) no more than six investment options including the default option in the PRPP; and

• (b) the same investment options to all members of the PRPP.

Marginal note:Notice — option no longer available

• 18 (1) The administrator of a PRPP must notify a member in writing as soon as feasible after the administrator becomes aware that the member’s investment option will no longer be available.

• Marginal note:Default options

  (2) If the member does not choose another investment option within 60 days after the day on which the notice is received, the administrator must invest the member’s funds in an option that is similar to the previous option or in the default option.

• Marginal note:No fee, charge or levy

  (3) There must be no fee, charge or other levy associated with the transfer of the funds in a member’s account into a new investment option under this section.

• Marginal note:Content of notice

  (4) The notice must

  • (a) for each investment option that is still available, include the description required under paragraph 23(c);

  • (b) indicate that the member has 60 days after the day on which the notice is received to choose another option; and

  • (c) indicate the administrator’s obligations under subsection (2) if the member does not choose another option within that period.