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Pooled Registered Pension Plans Regulations

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

“Act”

« Loi »

“Act” means the Pooled Registered Pension Plans Act.

“child”

« enfant »

“child”, in relation to a person, includes

(a) an individual of whom the person is the legal parent;

(b) an individual who is wholly dependent on the person for support and of whom the person has, or immediately before the individual attained the age of 19 years had, in law or in fact, the custody and control;

(c) a child of the person’s spouse or common-law partner; and

(d) a spouse or common-law partner of a child of the person.

“costs”

« coûts »

“costs” means all fees, levies and other charges that reduce a member’s return on investment other than those that are triggered by the actions of the member.

“debt obligation”

« titre de créance »

“debt obligation” means a bond, debenture, note or other evidence of indebtedness of an entity.

“entity”

« entité »

“entity” means

(a) a corporation, trust, partnership or fund or an unincorporated association or organization; or

(b) Her Majesty in right of Canada or of a province or the government of a foreign country or of a political subdivision of a foreign country, or an agency of any of them.

“loan”

« prêt »

“loan” includes a deposit, financial lease, conditional sales contract, repurchase agreement and any other similar arrangement for obtaining money or credit, but does not include investments in securities or the making of an acceptance, endorsement or other guarantee mechanism.

“marketplace”

« marché »

“marketplace” means

(a) an exchange;

(b) a quotation and trade reporting system;

(c) an entity not included in paragraph (a) or (b) that

(i) constitutes, maintains or provides a market or facility for bringing together buyers and sellers of securities or derivatives,

(ii) brings together the orders for securities or derivatives of multiple buyers and sellers, and

(iii) uses established, non-discretionary methods under which the orders interact with each other and with which the buyers and sellers entering the orders agree to the terms of a trade.

“market value”

« valeur marchande »

“market value”, in respect of an asset, means the price that would be obtained in the purchase or sale of the asset 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.

“person”

« personne »

“person” includes an entity.

“PRPP”

« RPAC »

“PRPP” means a pooled registered pension plan.

“related party”

« apparenté »

“related party”, in respect of a PRPP, means a person — other than Her Majesty in right of Canada or of a province, or an agency of either one, or a bank, trust company or other financial institution that holds the assets of the PRPP, if that person is not the administrator of the PRPP — who is

(a) an officer, a director or an employee or a member of the board of trustees of the administrator of the PRPP;

(b) responsible for holding or investing the assets of the PRPP, or an officer, director or employee of the person who is responsible for holding or investing those assets;

(c) a member of the PRPP;

(d) the spouse or common-law partner or a child of any person referred to in any of paragraphs (a) to (c);

(e) a corporation that is directly or indirectly controlled by a person referred to in any of paragraphs (a) to (d);

(f) an entity in which a person referred to in paragraph (a) or (b), or the spouse or common-law partner or a child of such a person, has a substantial investment; or

(g) an entity that holds a substantial investment in the administrator of the PRPP.

“security”

« titre » ou « valeur mobilière »

“security” means

(a) in respect of a corporation, a share of any class of shares of the corporation or a debt obligation of the corporation, and includes a warrant of the corporation, but does not include a deposit with a financial institution or a document evidencing such a deposit; and

(b) in respect of any other entity, any ownership interest in or debt obligation of the entity.

“voting share”

« action avec droit de vote »

“voting share” means a share of any class of shares of a corporation that carries voting rights under all circumstances, by reason of an event that has occurred and is continuing or by reason of a condition that has been fulfilled.

GENERAL

Indirect investments

2. For the purposes of these Regulations, the making, holding or acquiring of an investment indirectly by an administrator on behalf of a PRPP, the holding, acquiring or owning of property indirectly by an administrator on behalf of a PRPP or the lending of money indirectly by an administrator on behalf of a PRPP includes the holding, making, acquiring, owning or lending of an investment, a property or money, as the case may be, by a mutual fund, a pooled fund, a segregated fund or a trust fund in which the funds of the member’s account have been invested.

Control

3. (1) For the purposes of these Regulations,

(a) a person or an administrator of a PRPP controls a corporation if securities of the corporation to which are attached more than 50% of the votes that may be cast to elect the directors of the corporation are beneficially owned by the person or the administrator and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the corporation;

(b) a person or an administrator of a PRPP controls an unincorporated entity, other than a limited partnership, if more than 50% of the ownership interests into which the unincorporated entity is divided are beneficially owned by the person or the administrator and the person or the administrator is able to direct the business and affairs of the unincorporated entity;

(c) the general partner of a limited partnership controls the limited partnership; and

(d) a trustee of a trust controls the trust.

Presumed control

(2) For the purpose of these Regulations, a person or the administrator of a PRPP who controls an entity controls any other entity that is controlled by the entity.

Affiliates

4. For the purposes of these Regulations, an entity is affiliated with another entity if the entity is controlled by the other entity or if both entities are controlled by the same person.

Substantial investment

5. For the purposes of these Regulations, a person or an administrator of a PRPP has a substantial investment in

(a) an unincorporated entity if the person or the administrator, or an entity controlled by the person or the administrator, beneficially owns more than 25% of the ownership interests in the unincorporated entity; and

(b) a corporation if

(i) the voting rights attached to voting shares of the corporation that are beneficially owned by the person or the administrator, or by an entity controlled by the person or the administrator, exceed 10% of the voting rights attached to all of the outstanding voting shares of the corporation, or

(ii) shares of the corporation that are beneficially owned by the person or the administrator, or by an entity controlled by the person or the administrator, represent ownership of more than 25% of the shareholders’ equity of the corporation.

Associated

6. For the purposes of these Regulations, a person or an administrator of a PRPP is associated with

(a) a corporation that the person or the administrator controls and every affiliate of every such corporation;

(b) a person who controls the person or the administrator;

(c) a partner who has a substantial investment in a partnership in which the person or the administrator has a substantial investment;

(d) a trust or estate or succession in which the person or the administrator has a substantial investment or for which the person or the administrator serves as trustee or in a similar capacity to a trustee;

(e) the spouse or common-law partner of the person; and

(f) a brother, sister or child or other descendant of the person, or the spouse or common-law partner of any of them.

LICENSING

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 pension 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 PRPP to its members at low cost, and

(iv) an estimate of the costs and of the fees, levies or 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 risks associated with the PRPP;

(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 other document or information required to assess whether the corporation meets the conditions set out in paragraphs (b) to (e)‍.

PERMITTED INVESTMENTS

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 a 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.

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 shall not at any time constitute an asset of the custodian or nominee.

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.

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.

Exception

(3) Subsection (1) does not apply in respect of investments

(a) in a mutual fund, a pooled fund or a segregated fund that meets the requirements of sections 10 to 14;

(b) in an unallocated general fund of a person 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;

(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;

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

(g) that involves 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.

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.

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.

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.

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.

Prohibition — related party

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

(a) lend the 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.

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 the 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.

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.

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 that meets the requirements of sections 10 to 14 and that is offered to investors other than the administrator and its affiliates and in which other investors invest;

(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.

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 from the day on which the assets were acquired.

INVESTMENT CHOICES

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 the 60-day period referred to in paragraph 41‍(2)‍(a) of the Act, the investment option chosen by the administrator as the default option will apply to the member’s account.

Default option

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

Default option — investments

(2) The default option shall be

(a) a balanced fund; or

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

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.

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.

Default options

(2) If the member does not choose another investment option within 60 days from receipt of the notice, the administrator must invest the member’s funds in an option that is similar to the prior option or in the default option.

No fee, charge or levy

(3) There shall 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.

PERMITTED INDUCEMENTS

Permitted inducements

19. An administrator may give, offer or agree to give or offer to an employer and an employer may demand, accept or offer or agree to accept from an administrator, as an inducement to enter into a contract with the administrator in respect of a PRPP

(a) a product or a service on more favourable terms or conditions than the administrator would otherwise offer if the inducement is for the equal benefit of the employees of that employer who are eligible to be members of the PRPP; or

(b) in relation to a transfer of assets into the PRPP administered by the administrator, an amount no greater than the employer’s costs associated with the transfer of assets into that PRPP.

LOW COST PLAN

Criteria

20. The following criteria shall be used to determine whether a PRPP is being provided to its members at low cost:

(a) that costs are to be at or below those incurred by members of defined contribution plans that provide investment options to groups of 500 or more members; and

(b) that costs are to be the same for all members of a PRPP.

0% CONTRIBUTION RATE

Condition

21. (1) A member may set a contribution rate of 0% if 12 months have elapsed since the member’s contributions to the PRPP began.

Duration

(2) The rate may be set at 0% for a period of 3 to 60 months. There is no limit on the number of times that the rate may be set at 0%.

Contents of notice

(3) The notice to be provided to the administrator under subsection 45‍(2) of the Act must be in writing and shall include

a) the member’s name and contact information and the name of the member’s employer; and

(b) the period for which the contribution rate is to be set at 0%.

Duties of administrator

(4) The administrator must

(a) no more than 60 days after the day on which the administrator is notified under subsection 45‍(2) of the Act

(i) provide the member with written confirmation of when the contribution rate will be set at 0% and when contributions will resume, and

(ii) ensure that the member’s contribution rate is set at 0%; and

(b) no fewer than 90 days before the day on which contributions are to resume, provide the member with written notice of the day of resumption and the contribution rate on resumption.

RIGHTS TO INFORMATION

Information to be provided

22. For the purposes of subparagraph 57‍(1)‍(a)‍(ii) of the Act, a PRPP must provide that each member and each employer that is participating in the PRPP will be given

(a) on a website and, on the request of a member, directly to the member, as the case may be

(i) a description of each investment option that indicates

(A) its investment objectives,

(B) the type of investments and the degree of risk associated with the option,

(C) its top ten holdings by market value,

(D) its performance history,

(E) that its performance history is not necessarily an indication of future performance,

(F) a benchmark that best reflects the investment option,

(G) the costs charged by the investment option expressed as a percentage or a fixed amount, and

(H) its target asset allocation,

(ii) a statement of the transfer options available to a member and the costs associated with those options, and

(iii) a description of any fees, levies or other charges that would be triggered by the actions of a member; and

(b) on the request of a member, the details of any transactions that have occurred to date for the year in the member’s account, including any fees, levies or other charges incurred.

Prescribed information — written statement

23. For the purposes of subparagraph 57‍(1)‍(b)‍(ii) of the Act, the written statement must show

(a) the investment option in which the member is contributing;

(b) account balance information for the year, including the opening balance, contributions, the change in the value of the investments (net of costs) and the closing balance;

(c) a summary of any transactions for the year;

(d) the name and description of the benchmark that best reflects the composition of the member’s investment option as well as an explanation of the choice of the benchmark;

(e) the historical performance of the member’s investment option over 1, 3, 5 and 10 years compared to that of the benchmark;

(f) the degree of risk associated with the investment option;

(g) that past performance of the investment option is not necessarily an indication of future performance;

(h) any costs, expressed as a fixed amount or percentage, as the case may be;

(i) any fees, levies or other charges triggered by the actions of a member;

(j) how to access the information referred to in this section; and

(k) the member’s and employer’s contribution rates, expressed as a percentage.

Information return — prescribed information

24. For the purposes of subsection 58‍(1) of the Act, an information return shall contain

(a) a list of the investment options offered by the administrator that identifies the default option;

(b) an indication of the performance of each investment option;

(c) a list of the costs in relation to each investment option;

(d) a list of any fees, levies or charges triggered by the actions of a member;

(e) a statement of the total assets of the PRPP and of the amounts held in each investment option;

(f) a statement of the asset allocation and a list of the investments held in each investment option;

(g) the default contribution rate set by the administrator;

(h) a list of the employers who are or had been participating in the PRPP;

(i) the number of members in the PRPP;

(j) an auditor’s report on the assets of the PRPP; and

(k) a certificate of the administrator or any person preparing, compiling or filing any information on their behalf that certifies that the information provided to the Superintendent is accurate.

COMING INTO FORCE

Registration

25. These Regulations come into force on the day on which the Pooled Registered Pensions Plans Act, chapter 16 of the Statutes of Canada, 2012, comes into force.