Modernizing the Credit Unions and Caisses Populaires Act

Consultation Document

PART XIII
LEAGUES

Application

Application

      86.  This Regulation applies with respect to a league as if it were a credit union, except to the extent modified by this Part.

Capital Structure

Capital structure

      87.  For the purposes of subsection 74.1 (1) of the Act, the following are prescribed persons to whom a security of a league issued under circumstances described in clause 75 (1) (a) of the Act may be transferred:

           1.    A member of the league issuing the securities.

           2.    A member of a credit union that is a member of the league issuing the securities.

           3.    The Corporation. 

Adequate Capital

Adequate capital

      88.  (1)  A league has adequate capital if its regulatory capital at least equals 5 per cent of its total assets.

      (2)  Section 14 does not apply with respect to a league.

Business Powers

Business powers

      89.  For the purposes of subsection 241 (3.1) of the Act, a league may engage in or carry on the following business activities and provide the following services:

           1.    Accepting deposits and making loans.

           2.    Guaranteeing loans.

           3.    Providing administrative, advisory, educational, managerial, promotional and technical services to credit unions.

           4.    Arranging for one or more pension plans for the directors, officers, employees and members of credit unions, their subsidiaries and subsidiaries of the league.

           5.    Arranging for group bonding for directors, officers and employees of a credit union, its subsidiaries and subsidiaries of the league.

           6.    Providing credit counselling to members of credit unions who are repaying loans made by the credit unions.

Permitted activities

      90.  For the purposes of section 173 of the Act, a league may provide investment counselling and portfolio management services to its members, depositors, subsidiaries and affiliates.

Group insurance

      91.  (1)  A league may administer a group insurance policy for its employees, its members, the employees of its members or subsidiaries and credit unions that are not members and their employees.

      (2)  Group accident and sickness insurance and group life insurance administered by a league must be restricted to the league’s employees, its members, the employees of its members or subsidiaries and credit unions that are not members and their employees.

Trustee

      92.  For the purposes of section 177, a league is authorized to act as trustee with respect to an escrow agreement relating to share offerings by a credit union.

Investment and Lending

Investment and lending

      93.  Section 58 does not apply with respect to a loan made by a league to a credit union or to a subsidiary of the league.

Exception to restriction re single investments

      94.  (1)  For the purposes of subsection 199 (1) of the Act, the prescribed amount is 10 per cent of a league’s deposits and regulatory capital. 

      (2)  Despite subsection (1), La Fédération des caisses populaires de l’Ontario may invest 25 per cent of its deposits and regulatory capital in La Fédération des caisses Desjardins du Québec. 

Same

      95.  The following conditions are prescribed as conditions that, if satisfied in relation to a member or a customer of a league, result in persons being connected for the purposes of section 199 of the Act: 

           1.    Another person or entity is one of the following:

                          i.    a body corporate in which the member or customer holds or beneficially owns, directly or indirectly, at least 20 per cent of the voting securities;

                         ii.    an affiliate of a body corporate described in subparagraph i;

                       iii.    a person or entity that has a 50 per cent interest in a partnership in which the member or customer also has a 50 per cent interest;

                        iv.    a partnership in which the member or customer is a partner;

                         v.    a trust or estate in which the member or customer has a substantial beneficial interest;

                        vi.    a trust or estate in respect of which the member or customer serves as trustee or in a similar capacity;

                      vii.    a person or entity on whose financial resources the member or customer depends to repay a loan to a league;

                     viii.    a person who provides security to a league for a loan to the member or customer.

           2.    If another individual is one of the following:

                          i.    a spouse who is financially dependent on the member or customer;

                         ii.    a relative of the member or customer or of the member’s or customer’s spouse who lives in the same home as the member or customer, who is financially dependent on the member, customer or spouse.

Subsidiaries

Subsidiaries

      96.  For the purposes of subsection 241 (5) of the Act, leagues may carry on business through the following types of subsidiaries:

           1.    A subsidiary in which a credit union may invest under the Act.

           2.    A corporation established to carry out a league’s responsibilities as a stabilization authority.

           3.    A corporation established to administer development funds for the creation of new credit unions.

           4.    A corporation established to administer development funds for investments in, and loans to, small businesses.

           5.    A corporation that issues payment cards, credit cards or charge cards and operates a payment or charge card plan.

Restriction on investment in subsidiaries

      97.  For the purpose of subsection 200 (7) of the Act, the prescribed amount is 20 per cent of the league’s regulatory capital and deposits.

Exemptions from the Act

Exemptions from the Act

      98.  Leagues are exempted under subsection 243 (2) of the Act from the following provisions of the Act:

           1.    Section 31 (admissions outside bonds of association).

           2.    Section 46 (withdrawal of members).

           3.    Section 47 (expulsion of members).

           4.    Section 201.1 (investment in another credit union).

           5.    Section 217 (requisitions for meetings).

PART XIV
DEPOSIT INSURANCE CORPORATION OF ONTARIO

Definition

Definition

      99.  In this Part,

“deposit”, for the purpose of deposit insurance, has the meaning set out in the by-laws of the Corporation.

Investment of Funds

Investment of funds

      100.  (1)  For the purposes of section 269 of the Act, the Corporation may invest any funds not required in carrying out its objectives in securities in which a class 2 credit union may invest its funds.

      (2)  The board of directors of the Corporation shall establish prudent investment policies and procedures for the purpose of carrying out its object of managing the Deposit Insurance Reserve Fund.

      (3)  The board of directors of the Corporation shall review its investment policies and procedures at least once a year and shall make such revisions as may be necessary to ensure that the investment policies and procedures satisfy the requirements of subsection (2).

Same

      101.  For the purposes of section 269 of the Act, the Corporation’s investments are subject to the same restrictions that apply with respect to investments made by class 2 credit unions.

Deposit Insurance Limit

Deposit insurance limit

      102.  For the purposes of paragraph 2 of subsection 270 (2) of the Act, the Corporation shall not insure the amount of any one deposit that exceeds $100,000.

Amalgamations

Amalgamations

      103.  For the purposes of subsection 271 (3) of the Act, the prescribed amount is $100,000.

Annual Premium

Annual premium

      104.  (1)  For the purposes of paragraph 1 of subsection 276.1 (1) of the Act, the Corporation shall determine the credit union’s annual premium in accordance with this section.

      (2)  The Corporation shall determine the risk rating of each credit union and league in accordance with this section and with the rules set out in DICO Risk Classification System, dated November 10, 2000, as amended from time to time, and published by the Corporation in The Ontario Gazette on November 25, 2000.

      (3)  The risk rating of a credit union or league at a particular time is determined with reference to the following components:

           1.    Capital:  the level of regulatory capital of the credit union or league.

           2.    Asset quality:  the loan loss experience of the credit union or league.

           3.    Management:  the effectiveness of the risk management practices of the credit union or league, as determined with reference to the Act and By-law No. 5 of the Corporation (“Standards of Sound Business and Financial Practices”).

           4.    Earnings:  the average return on assets of the credit union or league.

           5.    Asset and liability management:  the level of interest rate risk of the credit union or league.

      (4)  The annual premium payable by a credit union or league is calculated at the rate set out in Column 3 of the Table to this section opposite the category of risk rating set out in Column 2 within which the credit union’s or league’s risk rating falls.

table

Column 1

Column 2

Column 3

Premium Class

Risk Rating

Premium Rate

1

85 points or more

$0.90 per $1,000 of the funds described in subsection (5) for a credit union and in subsection (6) for a league

2

At least 70 points and less than 85 points

$1.00 per $1,000 of those funds

3

At least 55 points and less than 70 points

$1.15 per $1,000 of those funds

4

At least 40 points and less than 55 points

$1.40 per $1,000 of those funds

5

Less than 40 points

$2.10 per $1,000 of those funds

      (5)  The calculation of the annual premium for a credit union is based only on Canadian funds on deposit with the credit union, and no premium is payable with respect to that portion of a deposit that is uninsured by virtue of section 270 of the Act.

      (6)  The calculation of the annual premium for a league is based on Canadian funds on deposit with the league for a person that is not a credit union, and no premium is payable with respect to that portion of a deposit that is uninsured by virtue of section 270 of the Act.

      (7)  The Corporation may estimate the amount of funds on deposit with the credit union or league using the quarterly financial return of the credit union or league and may adjust the premium upon receiving the audited financial statements.

      (8)  The annual premium payable by a credit union or league that carries on business for less than one year shall be reduced by an amount proportionate to the period during which it did not carry on business.

      (9)  Despite subsections (4) and (8), the minimum annual premium payable by a credit union or league is $250.

      (10)  The Corporation may use approximate figures in determining or calculating an amount under this section.

Payment of annual premium

      105.  A credit union or league shall pay its annual premium within 30 days after the date of the invoice for the premium.

Audited statement of deposits

      106.  A credit union or league shall file an audited statement of its deposits with the Corporation at such time as the Corporation directs and respecting such period as the Corporation directs.

PART XV
CONTINUING AS OR CEASING TO BE AN ONTARIO CREDIT UNION

Continuing as an Ontario credit union

Articles of continuance

      107.  The following are prescribed, for the purposes of subsection 316 (3) of the Act, as documents that must accompany the articles of continuance:

           1.    A copy of the incorporating document of the body corporate, together with all amendments to the document, certified by the officer of the incorporating jurisdiction who is authorized to so certify.

           2.    A letter of satisfaction, certificate of continuance or other document issued by the proper officer of the incorporating jurisdiction that indicates that the body corporate is authorized under the laws of the jurisdiction in which it was incorporated or continued to apply for articles of continuance.

Conditions for issue of certificate of continuance

      108.  The following are prescribed as conditions for the purposes of subsection 316 (5) of the Act:

           1.    The Superintendent shall not issue a certificate of continuance unless the body corporate satisfies the Superintendent that the matters set out in paragraphs 1 to 5 of subsection 16 (2) of the Act are satisfied.

           2.    The Superintendent shall not issue a certificate of continuance unless the body corporate satisfies the Superintendent that the body corporate would meet all the requirements of the Act if it were continued as a credit union.

Limits on transition period

      109.  (1)  The prescribed maximum period for the purposes of paragraph 1 of subsection 316 (12) of the Act is two years beginning on the date the articles of continuance became effective.

      (2)  The prescribed maximum extension period for the purposes of paragraph 2 of subsection 316 (12) of the Act is seven years beginning on the date the articles of continuance became effective.

Transfer to another jurisdiction

Conditions for issue of certificate of continuance

      110.  The following are prescribed as conditions for the purposes of subsection 316.1 (5) of the Act:

           1.    The Superintendent shall not issue a certificate of approval of continuance unless the credit union satisfies the Superintendent as to the following:

                          i.    the shareholders or members who voted against the special resolution to apply for the certificate of continuance will be entitled to be paid the value of their membership, patronage and other shares, calculated in accordance with subsection 62 (2) of the Act,

                         ii.    the credit union will proceed with the continuation before the certificate of approval of continuation expires, unless the directors, with the authorization of the shareholders or members, abandon the application.

           2.    The Superintendent shall not issue a certificate of approval of continuance unless the credit union satisfies the Superintendent that after the credit union is continued under the laws of the other jurisdiction, the laws of that jurisdiction provide in effect that,

                          i.    the continued body corporate will possesses all the property, rights, privileges and franchises and be subject to all the liabilities, including civil, criminal and quasi-criminal, and all contracts, disabilities and debts of the credit union,

                         ii.    a conviction against, or ruling, order or judgment in favour of or against, the credit union may be enforced by or against the continued body corporate, and

                       iii.    the continued body corporate will continue as a party in any civil action commenced by or against the credit union.

           3.    The Superintendent shall include, in each certificate of approval of continuance, a condition that the certificate expires if the credit union has not been continued within six months after the certificate was issued.

Continuation under Another Ontario Act

Conditions for issue of certificate of continuance

      111.  The following are prescribed as conditions for the purposes of subsection 316.2 (5) of the Act:

           1.    The Superintendent shall not issue a certificate of approval of continuance unless the credit union satisfies the Superintendent that the shareholders or members who voted against the special resolution to apply for the certificate of continuance will be entitled to be paid the value of their membership, patronage and other shares, calculated in accordance with subsection 62 (2) of the Act.

           2.    The Superintendent shall not issue a certificate of approval of continuance unless the credit union satisfies the Superintendent that, after the credit union is continued,

                          i.    the continued body corporate will possesses all the property, rights, privileges and franchises and be subject to all the liabilities, including civil, criminal and quasi-criminal, and all contracts, disabilities and debts of the credit union,

                         ii.    a conviction against, or ruling, order or judgment in favour of or against, the credit union may be enforced by or against the continued body corporate, and

                       iii.    the continued body corporate will continue as a party in any civil action commenced by or against the credit union.

           3.    The Superintendent shall include, in each certificate of approval of continuance, a condition that the certificate expires if the credit union has not been continued within six months after the certificate was issued.

PART XVI
CONSUMER PROTECTION

Disclosure Re Interest Rates, etc.

Disclosure re interest rates, etc.

      112.  (1)  A credit union shall disclose to a prospective depositor the applicable rate of interest for the person’s account and the manner of calculating the interest payable.

      (2)  Whenever there is a change in the rate of interest or in the manner of calculating the amount of interest that applies to a deposit account, the credit union shall disclose the change by means of,

         (a)    delivering a written statement to a person in whose name the account is maintained;

         (b)    displaying and making available copies of a written statement at each branch of the credit union where the accounts are held; or

         (c)    displaying a general notice at each branch of the credit union where the accounts are kept.

Same
      113.  If a credit union renews a term deposit account, the credit union shall disclose to the depositor the rate of interest for the account and the manner of calculating the interest payable.

Disclosure in advertising

      114.  (1)  In an advertisement about an interest-bearing deposit or a debt obligation, a credit union shall disclose how the interest is to be calculated and any circumstances that will affect the rate of interest.

      (2)  An advertisement about an interest-bearing deposit must state how the balance of a deposit account will affect the rate of interest.

Consumer Complaints by Members and Depositors

Consumer complaints by members and depositors

      115.  (1)  A credit union shall designate an employee of the credit union as the credit union’s complaints officer whose duty shall be to receive and attempt to resolve complaints made by members and depositors.

      (2)  A credit union shall advise its members and depositors, in a manner that it considers appropriate, of the name and contact information of the complaints officer.

      (3)  If a person who makes a written complaint to the credit union about the business activities of the credit union, the credit union shall give the person a written response to the complaint setting out the credit union’s proposed resolution of the complaint.

      (4)  A credit union shall also inform the person who made the complaint that, if the person is not satisfied with the proposed solution and if the person believes that the complaint relates to a contravention of the Act or a regulation, the person may refer the complaint to the Superintendent. 

      (5)  A credit union shall keep a copy of every complaint it receives, every response it issues and any other document that relates to a complaint for six years from the date of the complaint and shall make them available if requested to do so by the Superintendent. 

      (6)  The complaints officer shall report at least once annually to the Board about the complaints received and how they were disposed of in a form that is satisfactory to the Board.

Same

      116.  (1)  If, as a result of receiving a complaint, the Superintendent addresses an inquiry to a credit union or an officer about the conduct of the credit union’s business, the credit union or officer shall promptly reply in writing to the inquiry.

      (2)  If requested to do so by the Superintendent, the credit union shall give a copy of the Superintendent’s inquiry and the reply to each director of the credit union and the inquiry and reply shall form part of the minutes of the next board meeting.

PART XVII
ADMINISTRATIVE PENALTIES

Administrative penalties

      117.  (1)  For the purposes of subsections 331.2 (1) and 331.3 (1) of the Act, the amount of the administrative penalty for a contravention is, for each day on which the contravention occurs or continues, $100 for a class 1 credit union and $250 for a class 2 credit union.

      (2)  If the contravention is a failure to file a document or to provide information in accordance with subsection 331.2 (2) or 331.3 (2) of the Act, the contravention occurs on the day following the day on which the document was required to be filed or the information was required to be provided and continues until it is filed or provided, as the case may be, or until the credit union is notified by the Superintendent or the Corporation that the document or the information is no longer required.

      (3)  Despite subsection (2), where a person or entity has filed a document or provided information in the appropriate form but the document or information is incomplete or inaccurate, the contravention is deemed to have occurred on the day on which the person or entity is given written notice that the document or information is incomplete or inaccurate.

      (4)  If the contravention is a failure to hold a meeting in accordance with subsection 331.2 (2) or 331.3 (2) of the Act, the contravention is deemed to occur on the third day following the day on which the meeting was required to be held and continues until the meeting is held or until the credit union is notified by the Superintendent or the Corporation that the meeting is no longer required.

      (5)  In determining whether to impose an administrative penalty on a person or entity under subsection 331.2 (2) or 331.3 (2) of the Act for a purpose set out in section 331.1 of the Act, the Superintendent or the Corporation, whichever is authorized to impose the penalty, shall consider only the following:

           1.    Whether the contravention was caused by an event outside the person or entity’s control.

           2.    Whether the person or entity could have taken steps to prevent the contravention.

           3.    With respect to incomplete or inaccurate documents or information, whether due diligence was exercised in filing the documents or preparing the information.

           4.    Whether the person or entity derived or reasonably might have been expected to derive, directly or indirectly, any economic benefit from the contravention or failure. 

      (6)  A person or entity on whom an administrative penalty has been imposed must pay the penalty,

         (a)    if the order is not appealed, within 30 days from the date of the order of the Superintendent or the Corporation imposing the penalty or such longer time as may be specified in the order; or

         (b)    if the order is appealed under subsection 331.2 (5) or 331.3 (5) of the Act, within 30 days from the date the Tribunal confirms or varies the order or such longer time as may be specified in the order.

      (7)  Administrative penalties shall be paid into the Consolidated Revenue Fund.

whom a security issued under circumstances described in clause 75 (1) (a) of the Act may be transferred.

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