Financial Consumer Agency of Canada Act (S.C. 2001, c. 9)
Full Document:
Assented to 2001-06-14
Marginal note:1993, c. 34, s. 55(F); 1997, c. 15, ss. 140 to 149; 1999, c. 28, s. 116
314. Sections 386 to 408 of the Act are replaced by the following:
Marginal note:Definitions
386. (1) The following definitions apply in this Part.
“commercial loan”
« prêt commercial »
“commercial loan” means
(a) any loan made or acquired by an association, other than
(i) a loan to a natural person in an amount of two hundred and fifty thousand dollars or less,
(ii) a loan to the Government of Canada, the government of a province, a municipality, or to any agency thereof, or to the government of a foreign country or any political subdivision thereof, or any agency thereof, or to a prescribed international agency,
(iii) a loan that is guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in subparagraph (ii),
(iv) a loan that is secured by a mortgage on real property, where
(A) the mortgage is on residential property and the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, does not exceed 75 % of the value of the property at the time the loan is made or acquired, or
(B) the mortgage is on real property other than residential property and
(I) the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, does not exceed 75 % of the value of the property at the time the loan is made or acquired, and
(II) at the time the loan is made or acquired the property provides an annual income sufficient to pay all annual expenses related to the property, including the payments owing under the mortgage and the mortgages having an equal or prior claim against the property,
(v) a loan that is secured by a mortgage on real property, where
(A) the mortgage is on residential property and
(I) the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, exceeds 75 % of the value of the property at the time the loan is made or acquired, and
(II) repayment of the amount of the loan that exceeds 75 % of the value of the property is guaranteed or insured by a government agency or private insurer approved by the Superintendent, or
(B) the mortgage is on real property other than residential property and
(I) the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, exceeds 75 % of the value of the property at the time the loan is made or acquired,
(II) repayment of the amount of the loan that exceeds 75 % of the value of the property is guaranteed or insured by a government agency or private insurer approved by the Superintendent, and
(III) at the time the loan is made or acquired, the property provides an annual income sufficient to pay all annual expenses related to the property, including the payments owing under the mortgage and the mortgages having an equal or prior claim against the property,
(vi) a loan that
(A) consists of a deposit made by the association with a financial institution,
(B) is fully secured by a deposit with any financial institution, including the association,
(C) is fully secured by debt obligations guaranteed by any financial institution other than the association, or
(D) is fully secured by a guarantee of a financial institution other than the association,
(vii) a loan to another association under prescribed terms and conditions, if any are prescribed, or
(viii) a loan to any prescribed entity under prescribed terms and conditions, if any are prescribed;
(b) an investment in debt obligations, other than
(i) debt obligations that are
(A) guaranteed by any financial institution other than the association,
(B) fully secured by deposits with any financial institution, including the association, or
(C) fully secured by debt obligations that are guaranteed by any financial institution other than the association,
(ii) debt obligations issued by the Government of Canada, the government of a province, a municipality, or by any agency thereof, or by the government of a foreign country or any political subdivision thereof, or by any agency thereof, or by a prescribed international agency,
(iii) debt obligations that are guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in subparagraph (ii),
(iv) debt obligations that are widely distributed, as that expression is defined by the regulations,
(v) debt obligations that are issued by another association under prescribed terms and conditions, if any are prescribed,
(vi) debt obligations of an entity controlled by the association, or
(vii) debt obligations of a prescribed entity that are issued under prescribed terms and conditions, if any are prescribed; and
(c) an investment in shares of a body corporate or ownership interests in an unincorporated entity, other than
(i) shares or ownership interests that are widely distributed, as that expression is defined by the regulations,
(ii) shares or ownership interests of an entity controlled by the association, or
(iii) participating shares.
“factoring entity”
« entité s’occupant d’affacturage »
“factoring entity” means a factoring entity as defined in the regulations.
“finance entity”
« entité s’occupant de financement »
“finance entity” means a finance entity as defined in the regulations.
“financial leasing entity”
« entité s’occupant de crédit-bail »
“financial leasing entity” means an entity
(a) whose activities are limited to the financial leasing of personal property and such related activities as are prescribed and whose activities conform to such restrictions and limitations thereon as are prescribed; and
(b) that, in conducting the activities referred to in paragraph (a) in Canada, does not
(i) direct its customers or potential customers to particular dealers in the leased property or the property to be leased,
(ii) enter into lease agreements with persons in respect of any motor vehicle having a gross vehicle weight, as that expression is defined by the regulations, of less than twenty-one tonnes, or
(iii) enter into lease agreements with natural persons in respect of personal household property, as that expression is defined by the regulations.
“loan”
« prêt »ou« emprunt »
“loan” includes an acceptance, endorsement or other guarantee, a deposit, a financial lease, a conditional sales contract, a repurchase agreement and any other similar arrangement for obtaining funds or credit but does not include investments in securities.
“motor vehicle”
« véhicule à moteur »
“motor vehicle” means a motorized vehicle designed to be used primarily on a public highway for the transportation of persons or things, but does not include
(a) a fire-engine, bus, ambulance or utility truck; or
(b) any other special purpose motorized vehicle that contains significant special features that make it suitable for a specific purpose.
“mutual fund distribution entity”
« courtier de fonds mutuels »
“mutual fund distribution entity” means an entity whose principal activity is acting as a selling agent of units, shares or other interests in a mutual fund and acting as a collecting agent in the collection of payments for any such interests if
(a) the proceeds of the sales of any such interests, less any sales commissions and service fees, are paid to the mutual fund; and
(b) the existence of a sales commission and service fee in respect of the sale of any such interest is disclosed to the purchaser of the interest before the purchase of the interest.
“mutual fund entity”
« entité s’occupant de fonds mutuels »
“mutual fund entity” means an entity
(a) whose activities are limited to the investing of the funds of the entity so as to provide investment diversification and professional investment management to the holders of its securities; and
(b) whose securities entitle their holders to receive, on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in a part of its net assets, including a separate fund or trust account of the entity.
“participating share”
« action participante »
“participating share” means a share of a body corporate that carries the right to participate in the earnings of the body corporate to an unlimited degree and to participate in a distribution of the remaining property of the body corporate on dissolution.
“permitted entity”
« entité admissible »
“permitted entity” means an entity in which an association is permitted to acquire a substantial investment under section 390.
“prescribed subsidiary”
« filiale réglementaire »
“prescribed subsidiary” means a subsidiary that is one of a prescribed class of subsidiaries.
“real property brokerage entity”
« courtier immobilier »
“real property brokerage entity” means an entity that is primarily engaged in
(a) acting as an agent for vendors, purchasers, mortgagors, mortgagees, lessors or lessees of real property; and
(b) the provision of consulting or appraisal services in respect of real property.
“specialized financing entity”
« entité s’occupant de financement spécial »
“specialized financing entity” means a specialized financing entity as defined in the regulations.
Marginal note:Members of an association’s group
(2) For the purpose of this Part, a member of an association’s group is any of the following:
(a) an entity referred to in paragraph 390(1)(a) that controls the association;
(b) a subsidiary of the association or of an entity referred to in paragraph 390(1)(a) that controls the association;
(c) an entity in which the association, or an entity referred to in paragraph 390(1)(a) that controls the association, has a substantial investment; or
(d) a prescribed entity in relation to the association.
Marginal note:Non-application of Part
(3) This Part does not apply in respect of
(a) the holding of a security interest in real property, unless the security interest is prescribed under paragraph 403(a) to be an interest in real property; or
(b) the holding of a security interest in securities of an entity.
General Constraints on Investments
Marginal note:Investment standards
387. The directors of an association shall establish and the association shall adhere to investment and lending policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans to avoid undue risk of loss and obtain a reasonable return.
Marginal note:Restriction on control and substantial investments
388. (1) Subject to subsections (2) to (4), no association shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.
Marginal note:Exception: indirect investments
(2) An association may, subject to Part XII, acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of
(a) an acquisition of control of an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that controls or has a substantial investment in the entity; or
(b) an acquisition of shares or ownership interests in the entity by
(i) an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that is controlled by the association, or
(ii) an entity controlled by an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that is controlled by the association.
Marginal note:Exception: temporary investments, realizations and loan workouts
(3) An association may, subject to Part XII, acquire control of, or acquire or increase a substantial investment in, an entity by way of
(a) a temporary investment permitted by section 393;
(b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 394; or
(c) a realization of security permitted by section 395.
Marginal note:Exception: specialized financing regulations
(4) A retail association may, subject to Part XII, acquire control of, or hold, acquire or increase a substantial investment in, an entity other than a permitted entity if it does so in accordance with regulations made under paragraph 389(d) concerning specialized financing.
Marginal note:Exception: uncontrolled event
(5) An association is deemed not to contravene subsection (1) if the association acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the association.
Marginal note:Regulations re limits
389. The Governor in Council may make regulations
(a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Part;
(b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by an association and its prescribed subsidiaries to or in a person and any persons connected with that person;
(c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and
(d) concerning specialized financing for the purposes of subsection 388(4).
Subsidiaries and Equity Investments
Marginal note:Permitted investments
390. (1) Subject to subsections (4) to (6) and Part XII, an association may acquire control of, or acquire or increase a substantial investment in,
(a) an association;
(b) a bank or a bank holding company as that expression is defined in section 2 of the Bank Act;
(c) a body corporate to which the Trust and Loan Companies Act applies;
(d) an insurance company, a fraternal benefit society or an insurance holding company incorporated or formed by or under the Insurance Companies Act;
(e) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;
(f) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;
(g) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or
(h) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.
Marginal note:Permitted investments
(2) Subject to subsections (3) to (6) and Part XII, an association may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (h), whose business is limited to one or more of the following:
(a) engaging in any financial service activity or in any other activity that a retail association is permitted to engage in under subsection 375(2) or section 376 or 377;
(b) acquiring or holding shares of, or ownership interests in, entities in which an association is permitted under this Part to hold or acquire;
(c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the association or any member of the association’s group:
(i) the association,
(ii) any member of the association’s group,
(iii) any entity that is primarily engaged in the business of providing financial services,
(iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or
(v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;
(d) engaging in any activity that a retail association is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to
(i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by the association or any member of the association’s group, or
(ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;
(e) engaging in the activities referred to in the definition “mutual fund entity”, “mutual fund distribution entity” or “real property brokerage entity” in subsection 386(1); and
(f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.
Marginal note:Restriction
(3) An association may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include
(a) activities that an association is not permitted to engage in under any of sections 378, 382 and 382.1;
(b) dealing in securities, except as may be permitted under paragraph (2)(e) or as may be permitted either to an association under paragraph 376(1)(f) or to a retail association under subparagraph 376(1)(i)(ii);
(c) activities that an association is not permitted to engage in under section 381 if the entity engages in the activities of a finance entity or of any other entity as may be prescribed;
(d) acquiring control of or acquiring or holding a substantial investment in another entity unless
(i) in the case of an entity that is controlled by the association, the association itself would be permitted under this Part to acquire a substantial investment in the other entity, or
(ii) in the case of an entity that is not controlled by the association, the association itself would be permitted to acquire a substantial investment in the other entity under subsection (1) or (2) or 388(2), paragraph 388(3)(b) or (c) or subsection 388(4); or
(e) any prescribed activity.
Marginal note:Control
(4) Subject to subsection (8) and the regulations, an association may not acquire control of, or acquire or increase a substantial investment in,
(a) an entity referred to in any of paragraphs (1)(a) to (h), unless
(i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or
(ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment;
(b) an entity whose business includes one or more of the activities referred to in paragraph (2)(a) and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a finance entity, a factoring entity and a financial leasing entity, unless
(i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or
(ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment; or
(c) an entity whose business includes an activity referred to in paragraph (2)(b), including a specialized financing entity, unless
(i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity,
(ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment, or
(iii) subject to prescribed terms and conditions, if any are prescribed, the activities of the entity do not include the acquisition or holding of control of, or the acquisition or holding of shares or other ownership interests in, an entity referred to in paragraph (a) or (b) or an entity that is not a permitted entity.
Marginal note:Minister’s approval
(5) Subject to the regulations, an association may not, without the prior written approval of the Minister,
(a) acquire control of an entity referred to in any of paragraphs (1)(e) to (g) from a person who is not a member of the association’s group;
(b) acquire control of an entity referred to in paragraph (1)(h) or (4)(b), other than an entity whose activities are limited to the activities of one or more of the following entities, if the control is acquired from an entity referred to in any of paragraphs (1)(a) to (d) that is not a member of the association’s group:
(i) a factoring entity, or
(ii) a financial leasing entity;
(c) acquire control of, or acquire or increase a substantial investment in, an entity whose business includes one or more of the activities referred to in paragraph (2)(d);
(d) acquire control of, or acquire or increase a substantial investment in, an entity that engages in an activity described in paragraph 376(1)(g) or (h); or
(e) acquire control of, or acquire or increase a substantial investment in, an entity engaging in an activity prescribed for the purposes of paragraph (2)(f).
Marginal note:Superintendent’s approval
(6) Subject to subsection (7) and the regulations, an association may not acquire control of, or acquire or increase a substantial investment in, an entity referred to in any of paragraphs (1)(e) to (g) and (4)(b) and (c), unless the association obtains the approval of the Superintendent.
Marginal note:Exception
(7) Subsection (6) does not apply in respect of a particular transaction if
(a) the association is acquiring control of an entity whose business includes an activity referred to in paragraph (2)(b), other than a specialized financing entity;
(b) the association is acquiring control of an entity whose activities are limited to the activities of a factoring entity or a financial leasing entity; or
(c) the Minister has approved the transaction under subsection (5) or is deemed to have approved it under subsection 391(1).
Marginal note:Control not required
(8) An association need not control an entity referred to in paragraph (1)(h), or an entity that is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province, if the laws or customary business practices of the country under the laws of which the entity was incorporated or formed do not permit the association to control the entity.
Marginal note:Prohibition on giving up control in fact
(9) An association that, under subsection (4), controls an entity may not, without the prior written approval of the Minister, give up control, within the meaning of paragraph 3(1)(e), of the entity while it continues to control the entity.
Marginal note:Giving up control
(10) An association that, under subsection (4), controls an entity may, with the prior written approval of the Superintendent, give up control of the entity while keeping a substantial investment in the entity if
(a) the association is permitted to do so by regulations made under paragraph 396(c); or
(b) the entity meets the conditions referred to in subparagraph (4)(c)(iii).
Marginal note:Subsections do not apply
(11) If an association controls, within the meaning of paragraph 3(1)(a), (b), (c) or (d), an entity, subsections (5) and (6) do not apply in respect of any subsequent increases by the association of its substantial investment in the entity so long as the association continues to control the entity.
Marginal note:Approval for indirect investments
391. (1) If an association obtains the approval of the Minister under subsection 390(5) to acquire control of, or to acquire or increase a substantial investment in, an entity and, through that acquisition or increase, the association indirectly acquires control of, or acquires or increases a substantial investment in, another entity that would require the approval of the Minister under subsection 390(5) or the Superintendent under subsection 390(6) and that indirect acquisition or increase is disclosed to the Minister in writing before the approval is obtained, the association is deemed to have obtained the approval of the Minister or the Superintendent for that indirect acquisition or increase.
Marginal note:Approval for indirect investments
(2) If an association obtains the approval of the Superintendent under subsection 390(6) to acquire control of, or to acquire or increase a substantial investment in, an entity and, through that acquisition or increase the association indirectly acquires control of, or acquires or increases a substantial investment in, another entity that would require the approval of the Superintendent under that subsection and that indirect acquisition or increase is disclosed to the Superintendent in writing before the approval is obtained, the association is deemed to have obtained the approval of the Superintendent for that indirect acquisition or increase.
Marginal note:Undertakings
392. (1) If an association controls a permitted entity, other than an entity referred to in any of paragraphs 390(1)(a) to (d), the association shall provide the Superintendent with any undertakings that the Superintendent may require regarding
(a) the activities of the entity; and
(b) access to information about the entity.
Marginal note:Undertakings
(2) If an association acquires control of an entity referred to in any of paragraphs 390(1)(e) to (g), the association shall provide the Superintendent with any undertakings concerning the entity that the Superintendent may require.
Marginal note:Agreements with other jurisdictions
(3) The Superintendent may enter into an agreement with the appropriate official or public body responsible for the supervision of any entity referred to in any of paragraphs 390(1)(e) to (g) in each province or in any other jurisdiction concerning any matters referred to in paragraphs (1)(a) and (b) or any other matter the Superintendent considers appropriate.
Marginal note:Access to records
(4) Despite any other provision of this Part, an association shall not control a permitted entity, other than an entity referred to in any of paragraphs 390(1)(a) to (d), unless, in the course of the acquisition of control or within a reasonable time after the control is acquired, the association obtains from the permitted entity an undertaking to provide the Superintendent with reasonable access to the records of the permitted entity.
Exceptions and Exclusions
Marginal note:Temporary investments in entity
393. (1) Subject to subsection (4), an association may, by way of a temporary investment, acquire control of, or acquire or increase a substantial investment in, an entity but, within two years, or any other period that may be specified or approved by the Superintendent, after acquiring control or after acquiring or increasing the substantial investment, as the case may be, it shall do all things necessary to ensure that it no longer controls the entity or has a substantial investment in the entity.
Marginal note:Transitional
(2) Despite subsection (1), if an association that was in existence immediately before June 1, 1992 had an investment in an entity on September 27, 1990 that is a substantial investment within the meaning of section 12 and the association subsequently increases that substantial investment by way of a temporary investment, the association shall, within two years, or any other period that is specified or approved by the Superintendent, after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.
Marginal note:Extension
(3) The Superintendent may, in the case of any particular association that makes an application under this subsection, extend the period of two years, or the other period specified or approved by the Superintendent, that is referred to in subsection (1) or (2) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.
Marginal note:Temporary investment
(4) If an association, by way of temporary investment, acquires control of, or acquires or increases a substantial investment in, an entity for which the approval of the Minister under subsection 390(5) is required, the association must, within 90 days after acquiring control or after acquiring or increasing the substantial investment,
(a) apply to the Minister for approval to retain control of the entity or to continue to hold the substantial investment in the entity for a period specified by the Minister or for an indeterminate period on any terms and conditions that the Minister considers appropriate; or
(b) do all things necessary to ensure that, on the expiry of the 90 days, it no longer controls the entity or does not have a substantial investment in the entity.
Marginal note:Indeterminate extension
(5) If an association, by way of temporary investment, acquires control of, or acquires or increases a substantial investment in, an entity for which the approval of the Superintendent under subsection 390(6) is required, the Superintendent may, in the case of any particular association that makes an application under this subsection, permit the association to retain control of the entity or to continue to hold the substantial investment in the entity for an indeterminate period, on any terms and conditions that the Superintendent considers necessary.
Marginal note:Loan workouts
394. (1) Despite anything in this Part, if an association or any of its subsidiaries has made a loan to an entity and, under the terms of the agreement between the association, or any of its subsidiaries, and the entity with respect to the loan and any other documents governing the terms of the loan, a default has occurred, the association may acquire
(a) if the entity is a body corporate, all or any of the shares of the body corporate;
(b) if the entity is an unincorporated entity, all or any of the ownership interests in the entity;
(c) all or any of the shares or all or any of the ownership interests in any entity that is an affiliate of the entity; or
(d) all or any of the shares of a body corporate that is primarily engaged in holding shares of, ownership interests in or assets acquired from the entity or any of its affiliates.
Marginal note:Obligation of association
(2) If an association acquires shares or ownership interests in an entity under subsection (1), the association shall, within five years after acquiring them, do all things necessary to ensure that the association does not control the entity or have a substantial investment in the entity.
Marginal note:Transitional
(3) Despite subsection (1), if an association that was in existence immediately before June 1, 1992 had an investment in an entity on September 27, 1990 that is a substantial investment within the meaning of section 12 and the association later increases that substantial investment by way of an investment made under subsection (1), the association shall, within five years after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.
Marginal note:Extension
(4) The Superintendent may, in the case of any particular association that makes an application under this subsection, extend the period of five years referred to in subsection (2) or (3) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.
Marginal note:Exception — entities controlled by foreign governments
(5) Despite anything in this Part, if an association has made a loan to, or holds a debt obligation of, the government of a foreign country or an entity controlled by the government of a foreign country and, under the terms of the agreement between the association and that government or the entity, as the case may be, and any other documents governing the terms of the loan or debt obligation, a default has occurred, the association may acquire all or any of the shares of, or ownership interests in, that entity or in any other entity designated by that government, if the acquisition is part of a debt restructuring program of that government.
Marginal note:Time for holding shares
(6) If an association acquires any shares or ownership interests under subsection (5), the association may, on any terms and conditions that the Superintendent considers appropriate, hold those shares or ownership interests for an indeterminate period or for any other period that the Superintendent may specify.
Marginal note:Exception
(7) If, under subsection (1), an association acquires control of, or acquires or increases a substantial investment in, an entity that it would otherwise be permitted to acquire or increase under section 390, the association may retain control of the entity or continue to hold the substantial investment for an indeterminate period, if the approval in writing of the Minister is obtained before the end of the period referred to in subsection (2) or (3), including any extension of it granted under subsection (4).
Marginal note:Realizations
395. (1) Despite anything in this Act, an association may acquire
(a) an investment in a body corporate,
(b) an interest in an unincorporated entity, or
(c) an interest in real property,
if the investment or interest is acquired through the realization of a security interest held by the association or any of its subsidiaries.
Marginal note:Disposition
(2) Subject to subsection 81(2), if an association acquires control of, or a substantial investment in, an entity by way of the realization of a security interest held by the association or any of its subsidiaries, the association shall, within five years after the day on which the substantial investment is acquired, do all things necessary, or cause its subsidiary to do all things necessary, as the case may be, to ensure that the association no longer controls the entity or has a substantial investment in the entity.
Marginal note:Transitional
(3) Despite subsection (2), if an association that was in existence immediately before June 1, 1992 had an investment in an entity on September 27, 1990 that is a substantial investment within the meaning of section 12 and the association later increases that substantial investment by way of a realization of a security interest under subsection (1), the association shall, within five years after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.
Marginal note:Extension
(4) The Superintendent may, in the case of any particular association that makes an application under this subsection, extend the period of five years referred to in subsection (2) or (3) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.
Marginal note:Exception
(5) If, under subsection (1), an association acquires control of, or acquires or increases a substantial investment in, an entity that it would otherwise be permitted to acquire or increase under section 390, the association may retain control of the entity or continue to hold the substantial investment for an indeterminate period, if the approval in writing of the Minister is obtained before the end of the period referred to in subsection (2) or (3), including any extension of it granted under subsection (4).
Marginal note:Regulations restricting ownership
396. The Governor in Council may make regulations
(a) for the purposes of subsection 390(4), permitting the acquisition of control or the acquisition or increase of substantial investments, or prescribing the circumstances under which that subsection does not apply or the associations or other entities in respect of which that subsection does not apply, including prescribing associations or other entities on the basis of the activities they engage in;
(b) for the purposes of subsection 390(5) or (6), permitting the acquisition of control or the acquisition or increase of substantial investments, or prescribing the circumstances under which either of those subsections does not apply or the associations or other entities in respect of which either of those subsections does not apply, including prescribing associations or other entities on the basis of the activities they engage in;
(c) for the purposes of subsection 390(10), permitting an association to give up control of an entity; and
(d) restricting the ownership by an association of shares of a body corporate or of ownership interests in an unincorporated entity under sections 390 to 395 and imposing terms and conditions applicable to associations that own such shares or interests.
Portfolio Limits
Marginal note:Exclusion from portfolio limits
397. (1) Subject to subsection (3), the value of all loans, investments and interests acquired by an association and any of its prescribed subsidiaries under section 394 or as a result of a realization of a security interest is not to be included in calculating the value of loans, investments and interests of the association and its prescribed subsidiaries under sections 398 to 402
(a) for a period of twelve years following the day on which the interest was acquired, in the case of an interest in real property; and
(b) for a period of five years after the day on which the loan, investment or interest was acquired, in the case of a loan, investment or interest, other than an interest in real property.
Marginal note:Extension
(2) The Superintendent may, in the case of any particular association, extend any period referred to in subsection (1) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.
Marginal note:Exception
(3) Subsection (1) does not apply in respect of an investment or interest described in that subsection if the investment or interest is defined by a regulation made under section 403 to be an interest in real property and
(a) the association or the subsidiary acquired the investment or interest as a result of the realization of a security interest securing a loan that was defined by a regulation made under section 403 to be an interest in real property; or
(b) the association or the subsidiary acquired the investment or interest under section 394 as a result of a default referred to in that section in respect of a loan that was defined by a regulation made under section 403 to be an interest in real property.
Commercial Loans
Marginal note:Lending limit: regulatory capital of $25 million or less
398. An association with twenty-five million dollars or less of regulatory capital shall not, and shall not permit its prescribed subsidiaries to,
(a) make or acquire a commercial loan, or
(b) acquire control of a permitted entity that holds commercial loans,
if the aggregate value of all commercial loans held by the association and its prescribed subsidiaries exceeds, or the acquisition or making of the commercial loan or the acquisition of control of the entity would cause the aggregate value of all commercial loans held by the association and its prescribed subsidiaries to exceed, 5 % of the total assets of the association.
Marginal note:Lending limit: regulatory capital over $25 million
399. An association with more than twenty-five million dollars of regulatory capital may
(a) make or acquire commercial loans, or
(b) acquire control of a permitted entity that holds commercial loans,
if the aggregate value of all commercial loans held by the association and its prescribed subsidiaries would thereby exceed 5 % of the total assets of the association only with the prior approval in writing of the Superintendent and in accordance with any terms and conditions that the Superintendent may specify.
Meaning of “total assets”
400. For the purposes of sections 398 and 399, “total assets”, in respect of an association, has the meaning given to that expression by the regulations.
Real Property
Marginal note:Limit on total property interest
401. An association shall not, and shall not permit its prescribed subsidiaries to, purchase or otherwise acquire an interest in real property or make an improvement to any real property in which the association or any of its prescribed subsidiaries has an interest if the aggregate value of all interests of the association in real property exceeds, or the acquisition of the interest or the making of the improvement would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the association.
Equities
Marginal note:Limits on equity acquisitions
402. An association shall not, and shall not permit its prescribed subsidiaries to,
(a) purchase or otherwise acquire any participating shares of any body corporate or any ownership interests in any unincorporated entity, other than those of a permitted entity in which the association has, or by virtue of the acquisition would have, a substantial investment, or
(b) acquire control of an entity that holds shares or ownership interests referred to in paragraph (a),
if the aggregate value of
(c) all participating shares, excluding participating shares of permitted entities in which the association has a substantial investment, and
(d) all ownership interests in unincorporated entities, other than ownership interests in permitted entities in which the association has a substantial investment,
beneficially owned by the association and its prescribed subsidiaries exceeds, or the purchase or acquisition would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the association.
Miscellaneous
Marginal note:Regulations
403. For the purposes of this Part, the Governor in Council may make regulations
(a) defining the interests of an association in real property;
(b) determining the method of valuing those interests; or
(c) exempting classes of associations from the application of sections 397 to 402.
Marginal note:Divestment order
404. (1) The Superintendent may, by order, direct an association to dispose of, within any period that the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.
Marginal note:Divestment order
(2) If, in the opinion of the Superintendent,
(a) an investment by an association or any entity it controls in shares of a body corporate or in ownership interests in an unincorporated entity enables the association to control the body corporate or the unincorporated entity, or
(b) the association or any entity it controls has entered into an arrangement whereby it or its nominee may veto any proposal put before
(i) the board of directors of a body corporate, or
(ii) a similar group or committee of an unincorporated entity,
or whereby no proposal may be approved except with the consent of the association, the entity it controls or the nominee,
the Superintendent may, by order, require the association, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the association no longer controls the body corporate or unincorporated entity or has the ability to veto or otherwise defeat any proposal referred to in paragraph (b).
Marginal note:Divestment order
(3) If
(a) an association
(i) fails to provide or obtain within a reasonable time the undertakings referred to in subsection 392(1), (2) or (4), or
(ii) is in default of an undertaking referred to in subsection 392(1) or (2) and the default is not remedied within ninety days after the day of receipt by the association of a notice from the Superintendent of the default, or
(b) a permitted entity referred to in subsection 392(4) is in default of an undertaking referred to in subsection 392(4) and the default is not remedied within ninety days after the day of receipt by the association of a notice from the Superintendent of the default,
the Superintendent may, by order, require the association, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the association no longer has a substantial investment in the entity to which the undertaking relates.
Marginal note:Exception
(4) Subsection (2) does not apply in respect of an entity in which an association has a substantial investment permitted by this Part.
Marginal note:Deemed temporary investment
405. If an association controls or has a substantial investment in an entity as permitted by this Part and the association becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 390(5) or (6), the association is deemed to have acquired, on the day the association becomes aware of the change, a temporary investment in respect of which section 393 applies.
Marginal note:Asset transactions
406. (1) An association shall not, and shall not permit its subsidiaries to, without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if
A + B > C
where
- A
- is the value of the assets;
- B
- is the total value of all assets that the association and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer; and
- C
- is ten per cent of the total value of the assets of the association, as shown in the last annual statement of the association prepared before the acquisition or transfer.
Marginal note:Restriction
(2) The prohibition in subsection (1) does not apply in respect of a transaction or series of transactions between an association and a member of the association.
Marginal note:Exception
(3) The prohibition in subsection (1) does not apply in respect of
(a) an asset that is a debt obligation referred to in subparagraphs (b)(i) to (vi) of the definition “commercial loan” in subsection 386(1); or
(b) a transaction or series of transactions by an association with another financial institution as a result of the association’s participation in one or more syndicated loans with that financial institution.
Marginal note:Exception
(4) The approval of the Superintendent is not required if
(a) the association sells assets under a sale agreement that is approved by the Minister under section 233.5; or
(b) the association or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VIII or subsection 390(5) is required or the approval of the Superintendent under subsection 390(6) is required.
Marginal note:Value of assets
(5) For the purposes of “A” in subsection (1), the value of the assets is
(a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the association after the acquisition, the fair market value of the assets; and
(b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the association prepared before the transfer, or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the association before the transfer, the value of the assets as stated in the annual statement.
Marginal note:Total value of all assets
(6) For the purposes of subsection (1), the total value of all assets that the association or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the association, the fair market value of the assets of the entity at the date of the acquisition.
Marginal note:Total value of all assets
(7) For the purposes of subsection (1), the total value of all assets that the association or any of its subsidiaries has transferred during the period of twelve months referred to in subsection (1) is the book value of the assets as stated in the last annual statement of the association prepared before the transfer, or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the association before the transfer, the value of the assets of the entity as stated in the annual statement.
Marginal note:Transitional
407. Nothing in this Part requires
(a) the termination of a loan made before February 7, 2001;
(b) the termination of a loan made after that date as a result of a commitment made before that date;
(c) the disposal of an investment made before that date; or
(d) the disposal of an investment made after that date as a result of a commitment made before that date.
But if the loan or investment would be precluded or limited by this Part, the amount of the loan or investment may not, except as provided in subsections 393(2), 394(3) and 395(3), be increased after that date.
Marginal note:Saving
408. A loan or investment referred to in section 407 is deemed not to be prohibited by the provisions of this Part.
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