Acts and Regulations

92-47 - General

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Current to 1 January 2024
NEW BRUNSWICK
REGULATION 92-47
under the
Loan and Trust Companies Act
(O.C. 92-286)
Filed April 8, 1992
Under section 275 of the Loan and Trust Companies Act, the Lieutenant-Governor in Council makes the following Regulation:
1This Regulation may be cited as the General Regulation - Loan and Trust Companies Act.
2In this Regulation
“Act” means the Loan and Trust Companies Act;(Loi)
“generally accepted accounting principles” includes the standards as revised from time to time of the Canadian Institute of Chartered Accountants as set out in their handbook;(principes comptables général reconnus)
“municipality” means a local government as defined in subsection 1(1) of the Local Governance Act.(municipalité)
2017, c.20, s.96
I
NAMES
3For the purposes of paragraph 19(1)(b) of the Act, a provincial company shall not be incorporated or continued with a name or be given a name upon application to change its name
(a) if the words forming the name include “New Brunswick”, “N. B.”, “Nouveau-Brunswick” or “N.-B.”, unless the use of the word or words is approved by the Minister,
(b) if the name indicates that the company is connected with or established or supported by the Government of Canada, the government of a province, the government of a country other than Canada or the governing authority of any city, town or other municipality,
(c) if the name indicates that the company has authority from or exercises any function of government,
(d) if the name is known within Canada as the name of a recognized bank, loan or trust company, insurance corporation, credit union or investment or securities dealer incorporated, registered or licensed in Canada or a province or territory of Canada, unless the incorporated, registered or licensed institution has given consent, or
(e) if the name is too general to be distinctive.
II
CAPITAL BASE
4(1)In this Part
“book value” with respect to an asset means the cost or amortized cost of the asset less provisions or allowances for losses, accumulated depreciation and received but unearned interest.
4(2)For the purposes of subparagraph 5(b)(ii), “investment” does not include a loan, whether secured or unsecured, or an investment in real estate or in a subsidiary.
5The capital base of a company shall be calculated by
(a) adding the book value of
(i) all or any portion of the fully paid-in common and preferred shares,
(ii) contributed surplus,
(iii) subordinated notes,
(iv) retained earnings or deficit, determined in accordance with Part III, and
(v) net deferred income taxes payable, and
(b) deducting from the sum determined under paragraph (a)
(i) the sum of the book values of
(A) the portion of any shares of a subsidiary loan company or trust company licensed under the Act or under similar legislation that is included by the subsidiary in calculating its capital base,
(B) goodwill and other intangible assets,
(C) deferred charges, including start-up costs, operating losses and other such charges,
(D) leasehold improvements after deducting the accumulated amortization on the leasehold,
(E) any investment, or any part of any investment, that is not permitted by or is in excess of the limits imposed by the Act or the regulations or by the terms, conditions and restrictions imposed on the company’s licence,
(F) where the company is an extra-provincial company, any investment, or any part of any investment, that is not permitted by or is in excess of the limits imposed by the Act or the regulations of the jurisdiction in which it was incorporated or of its designated jurisdiction,
(G) any investment in the shares of or any loans made to a securities dealer if the company owns more than ten per cent of its voting shares,
(H) unrealized losses on foreign currency translations, and
(I) net deferred income tax recoverable,
(ii) the amount, if any, by which the aggregate book value of the investments of the company, except securities issued or guaranteed by the Government of Canada, an agent of the Government of Canada or the government or an agent of the government of a province, territory or municipality exceeds the aggregate market value of the investments determined in accordance with section 6,
(iii) the amount, if any, by which the aggregate net book value of real estate, except office premises, owned by the company exceeds its aggregate market value as determined by an appraisal made within the two years preceding the calculation, and
(iv) if the company has a subsidiary that is not a licensed company, the amount calculated in accordance with section 7.
6(1)In this section
“valuation date” in relation to the market value of a company’s investment means the date as of which the capital base of the company is calculated.
6(2)For the purposes of subparagraph 5(b)(ii), the market value of the investments of a company shall be determined in accordance with this section.
6(3)The market value of an investment shall be determined as of the valuation date.
6(4)A share that is listed on any stock exchange shall be valued at its closing sale price on the valuation date or, if there is no sale price reported for the share on the valuation date, at the more recent of
(a) the average of the most recent bid price and the most recent asked price for the share, and
(b) the most recent sale price published for the share.
6(5)An investment that is not listed on any stock exchange shall be valued
(a) if a bid price and an asked price for the investment have been available to the public within sixty days before the valuation date, at the average of the most recently available bid price and asked price,
(b) if no bid price or asked price for the investment has been available to the public within sixty days before the valuation date, at the value for the investment that is determined by a valuator appointed for that purpose, and
(c) if a value for the investment has not been determined under paragraph (a) or (b), at the value calculated by reducing the book value of the investment by twenty-five per cent on the first anniversary of the acquisition of the investment and by fifty per cent on the second anniversary.
6(6)If a determination of the market value of an investment in preferred shares under subsection (4) or paragraph (5)(a) results in a value that is not representative of the true value of the investment and if the shares
(a) have a variable dividend rate that is altered periodically in accordance with a predetermined index, and
(b) are part of an underwriting in which the issuer raised at least fifty million dollars in the initial issue,
the market value of the shares shall be determined by a valuator appointed for that purpose.
6(7)In determining the value of an investment under paragraph (5)(b) or subsection (6), the valuator shall consider the most recent audited financial statements of the body corporate or other entity that issued the investment and all other pertinent financial and other information to the date of the valuation.
6(8)No valuation done under paragraph (5)(b) or subsection (6) shall be completed more than six months before the valuation date.
7The amount referred to in subparagraph 5(b)(iv) shall be, for each subsidiary, the product of
(a) the percentage of equity that the parent company holds in the subsidiary, and
(b) the sum of the book values and amounts referred to in subparagraphs 5(b)(i) to (iii) when calculated for the subsidiary as though it were the company referred to in those subparagraphs.
III
RETAINED EARNINGS AND DEFICIT IN CALCULATING CAPITAL BASE
8For the purposes of subparagraph 5(a)(iv), the amount of the retained earnings and deficit
(a) of a provincial company shall be determined in accordance with this Part, and
(b) of an extra-provincial company shall be determined in accordance with
(i) the requirements of its designated jurisdiction,
(ii) the requirements of its jurisdiction of incorporation, and
(iii) generally accepted accounting principles.
Investment In Subsidiaries
9The equity method of accounting shall be used to calculate a company’s investment in the shares of a subsidiary.
Swaps, Futures and Similar Instruments
10(1)In this section
“financial future” means a contract to buy or sell a standard quantity of a specified financial instrument on a specified future date at an agreed price;(contrat financier à terme)
“interest rate swap” means an agreement between two parties in which the parties agree to exchange interest payments and usually in which one party agrees to make payments at a fixed interest rate and the other party agrees to make payments at a floating interest rate, predicated on notional principal value.(opérations d’échange du taux d’intérêt)
10(2)If a company enters into an interest rate swap or similar agreement and the purpose of the transaction is to hedge against interest rate or similar risks associated with its specific assets and liabilities or groups of specific assets and liabilities through a compensatory price movement contract, the net interest shall be recorded in the income accounts as it occurs.
10(3)If a company acquires a financial future, financial option or similar instrument and the purpose of the transaction is to hedge against interest rate or similar risks associated with its specific assets and liabilities or groups of specific assets and liabilities through a compensatory price movement contract, any gain or loss shall be deferred until the closure of the hedge.
10(4)If a company acquires a financial future, financial option or similar instrument other than for hedging purposes, the instrument shall be marked-to-market daily on an individual contract basis, any unrealized loss shall be recognized on that basis in the income accounts and any unrealized gain shall be deferred until realized.
11(1)In this section
“covered option” means a contract under which the purchaser acquires the right to require a company to sell to it, within or at a specified time, for a specified amount, specified securities that the company owns at the time of contracting.
11(2)Any premium received for writing a covered option shall be recorded as a reduction in the book value of the applicable investment until the expiry or exercise of the option.
11(3)On the expiry of a covered option, the premium received shall be recorded as income.
11(4)On the exercise of a covered option, the premium received shall be included in the gain or loss on the disposition of the applicable investment.
Short Selling and Uncovered Call Options
12(1)In this section
“short” in relation to the selling of a security by a company means the selling of a security that the company does not own or have the right to acquire at the time of making the sale.
12(2)If a company sells equity or debt obligations short,
(a) the investment in the short sale contract shall initially be recorded by treating the amount due from the investment dealer as an investment made under subsection 45(1) of the Act,
(b) after being recorded in accordance with paragraph (a), the investment in the short sale contract shall be marked-to-market daily, on a contract-by-contract basis, with any accumulated losses being recorded in the company’s income accounts, and
(c) any unrealized gains on the investment in the short sale contract shall be deferred except to the extent that the recording of gains would increase the investment to its original value.
13(1)A premium received for writing an uncovered call option shall be recorded as deferred income until the option lapses or is exercised or until an equal offsetting contract is purchased.
13(2)If an uncovered call option
(a) lapses unexercised, the premium shall be recorded as income,
(b) is exercised, the premium shall be included in the gain or loss on the transaction, or
(c) is offset by the purchase of an equal offsetting contract, the premium previously received shall be netted against the premium paid on the contract purchased and the net gain or loss shall be recorded in the income accounts at the time of the purchase of the contract.
13(3)Every uncovered call option shall be marked-to-market daily on a contract-by-contract basis with any accumulated losses being recorded in the income accounts.
13(4)No unrealized gains on an uncovered call option shall be recorded except to reverse previously recorded losses on the transaction.
Financial Instruments Generally
14(1)When a company enters into a transaction referred to in sections 11 to 13, the company shall determine whether the transaction is made for hedging purposes or capital appreciation purposes and shall document its determination with its accounting records.
14(2)Any unrealized gains and losses on transactions mentioned in sections 11 to 13 that are entered into for hedging purposes shall be deferred until the closure of the hedge.
14(3)Any unrealized losses arising from transactions mentioned in sections 11 to 13 that are entered into for capital appreciation purposes shall be marked-to-market daily on a contract-by-contract basis and any unrecognized gains shall be deferred on a contract-by-contract basis until the termination of the applicable agreement.
14(4)After a company has made a determination under subsection (1) in respect of a transaction, the company shall not change its method of accounting for gains and losses arising from the transaction.
Asset-Backed Securities Arrangements
15(1)In this section
“asset-backed securities arrangement” means an arrangement for the sale of assets that entitles the purchaser to an undivided beneficial interest in a pool of assets.
15(2)If a company has approved issuer status granted by the Canada Mortgage and Housing Corporation under the Canada Mortgage and Housing Corporation mortgage-backed securities program, any gain on disposition arising from the sale of interests in pools of mortgages under that program may be recorded immediately in the income accounts.
15(3)Any gain on disposition arising from the sale by the company of interests in pools of mortgages under a mortgage-backed securities program under the National Housing Act (Canada) may be recorded immediately in the income accounts.
15(4)If a company sells interests in pools of assets and retains administration of the assets on behalf of the purchasers under an asset-backed securities arrangement, other than one described in subsection (2) or (3), a portion of any gain on the sale that is equal to the maximum loss sustainable by the company under any recourse provision of the arrangement shall be treated as deferred income until the maturity of the asset-backed securities.
Recognition of Gains and Losses on Asset Sales
16(1)If a company sells an asset to a purchaser who is not a restricted party and the purchaser makes a cash downpayment of at least twenty-five per cent of the purchase price, the determination of any gain or loss on the sale may be made without taking into account any reduced rate financing on the sale offered to the purchaser and any commercial and reasonable performance guarantee given to the purchaser.
16(2)If a company sells an asset to a purchaser who is not a restricted party and the purchaser does not make a cash downpayment of at least twenty-five per cent of the purchase price, the determination of any gain or loss on the sale shall take into account the estimated costs of any performance guarantee given by the company and any forebearance of interest.
16(3)Gains and losses on the sale of securities shall be recognized in the income accounts at the time of the sale.
Real Estate Project Accounting
17(1)Lease-up costs, general and administrative expenses and other indirect costs that do not relate specifically to real estate projects under development shall be charged to expenses in the income accounts as they are incurred.
17(2)The book value of a real estate development project shall not exceed the current market value of the project as reduced by the estimated costs of disposition.
17(3)Revenue from the sale of real estate shall not be recognized until
(a) the significant risks and rewards of ownership have been transferred to a purchaser in good faith in a transaction in which all significant acts have been completed and the company does not retain any continuing managerial involvement to the degree usually associated with the ownership of real estate, and
(b) the collection of the proceeds from the sale is reasonably assured.
17(4)For the purposes of subsection (3), significant acts shall not be considered to be completed until such time as all parties are unconditionally bound by the terms of the contract.
17(5)Financing and carrying costs for vacant real estate held for resale or development shall be charged to the income accounts as they are incurred.
92-102
Recognition of Fee Income
18In sections 19 to 26
“loan fees” means the total of all placement fees, application fees, management fees and other similar fees payable in respect of a loan, mortgage or lease except those that are unconditionally refundable and includes
(a) loan fees charged to a debtor, mortgagor or lessee for arranging or originating a loan, mortgage or lease,
(b) commitment fees, including standby fees, guarantee fees and other fees of like nature, and
(c) interest rate pay-down fees.
19Sections 20 to 26 apply if the loan fees for a loan, mortgage or lease or a proposed loan, mortgage or lease exceed the lesser of
(a) one thousand dollars, and
(b) one per cent of the principal amount of the loan, mortgage or lease.
20For the purpose of calculating the amount of loan fees, fees charged to a third party shall be deemed to be fees charged to a debtor, mortgagor or lessee if the third party and the debtor, mortgagor or lessee are related or associated or if the third party sold the mortgaged property to the mortgagor.
21(1)Loan fees shall be recognized as revenue and as an adjustment of the contractual interest rate over the deemed expected term of the loan to which the fees relate and shall be amortized on a time proportion basis so as to result in a constant interest rate adjustment to the yield on the loan.
21(2)The expected term of a loan shall be deemed to be the contractual maturity date unless
(a) the borrower has a right to renew the loan according to the contract terms, in which event the expected term shall be deemed to be extended in accordance with the right,
(b) the maturity date according to the contract occurs in 12 months or less and in light of the economic substance of the financing it may reasonably be expected that the loan will be renewed, in which event the expected term shall be deemed to be three years, or
(c) there is no contractual maturity date, in which event the expected term shall be deemed to be five years after the contract date.
21(3)For the purposes of subsection (2), the deemed expected term of a loan shall not be affected by any prepayment rights that the borrower is entitled to exercise.
22(1)Direct costs, including finder’s fees and commissions, legal fees, appraisals and other direct costs relating to a loan, mortgage or lease and paid to independent third parties may be recognized on the same basis as loan fees.
22(2)Indirect costs, including supervisory costs, overhead costs and other indirect costs relating to a loan, mortgage or lease shall be expensed in the period in which they are incurred.
23(1)A non-refundable commitment fee shall be accounted for as deferred income and shall not be recognized as revenue while the commitment, by its terms, remains unexpired.
23(2)A commitment fee for an expired unexercised commitment shall be recognized as revenue as of the date of expiry.
23(3)A commitment fee for an exercised commitment shall be treated as a loan fee for the resulting loan by the company.
24(1)An unconditionally refundable fee shall be accounted for as a deposit until the fee is refunded.
24(2)A refundable fee subject to conditions shall be treated as a deposit until the conditions are fulfilled, at which time the residual amount shall be treated as loan fees.
25(1)When a loan, mortgage or lease is sold or the balance of a loan, mortgage or lease is extinguished in the ordinary course of business, any related unamortized loan fees shall be recognized as revenue upon the sale or extinguishment.
25(2)Subsection (1) does not apply in the case of a sale unless all risks and rewards of ownership have been transferred in good faith to an independent third party.
25(3)If the terms of a loan, mortgage or lease permit prepayments of principal in an amount that exceeds twenty-five per cent of the balance outstanding and such a prepayment is made, the amortization of the unamortized loan fees may be correspondingly accelerated in the proportion that the amount of the prepayment bears to the balance outstanding.
25(4)When a company ceases to recognize the contractual interest rate on a loan, mortgage or lease as income because of the doubtful collectibility of the balance of the loan, mortgage or lease, no unamortized fees shall be amortized until the loan, mortgage or lease ceases to be in arrears.
25(5)When a loan, mortgage or lease is renegotiated because of adverse circumstances of the debtor, mortgagor or lessee or is otherwise restructured, any unamortized fees from the original loan, mortgage or lease shall be treated as loan fees for the renegotiated transaction.
25(6)If proceedings for foreclosure or under a power of sale in a mortgage are begun, any unamortized loan fees for the mortgage shall be netted against the outstanding balance of the mortgage.
26In any transaction in which a company acquires an asset, any fee received by the company from the vendor to complete the transaction shall be recorded as an adjustment to the purchase price of the asset.
Troubled Loan Refinancing or Restructuring
27For the purposes of section 28, a troubled loan refinancing or restructuring occurs when a company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise grant.
28(1)The amount of any loss resulting from a troubled loan refinancing or restructuring in which only the repayment terms of the loan are modified shall be determined by deducting the discounted value of the total future cash receipts for the loan under the modified terms from the discounted value of the total future cash receipts for the loan under the original terms.
28(2)A loss determined under subsection (1) shall be recorded as a loss in the income accounts at the time of the refinancing or restructuring and the book value of the loan shall be adjusted accordingly.
28(3)If the discounted value of the total cash receipts for a loan under a troubled loan refinancing or restructuring is greater than the discounted value of the total cash receipts for the original loan, interest income for the refinanced or restructured loan shall be calculated using the effective interest rate determined in accordance with subsection (4).
28(4)For the purposes of subsection (3), the effective interest rate for the refinanced or restructured loan shall be the discount rate that equates the present value of future cash receipts under the refinanced or restructured loan with the amount of the recorded investment.
28(5)Any payment for a loan following a troubled loan refinancing or restructuring that is received
(a) within six months after the refinancing or restructuring, if the payment is collectible monthly, or
(b) within one year after the refinancing or restructuring, if the payment is collectible other than monthly,
shall be applied in reduction of the outstanding principal amount of the loan and shall not be attributed to interest income.
28(6)After the expiry of the applicable time period established under subsection (5), interest income may be recorded at the effective interest rate of the loan, which shall be deemed to be the discount rate that equates the present value of the future cash receipts under the terms of the refinancing or restructuring with the amount of the outstanding principal.
28(7)If a troubled loan refinancing or restructuring involves the partial repayment of the loan by way of consideration other than cash and modifies the repayment terms of the loan
(a) the fair market value of the non-cash consideration shall be determined and accounted for as a partial repayment of the loan, and
(b) any loss resulting from the refinancing or restructuring shall be calculated in accordance with this section.
28(8)For the purposes of subsection (7), no value shall be ascribed to any contingent consideration receivable, including rights to future profit participations and any other contingent considerations receivable.
28(9)No amount payable to the company as contingent consideration shall be recognized as interest or other income until it is received.
28(10)All legal fees and other costs incurred with respect to a troubled loan refinancing or restructuring shall be expensed as they are incurred.
28(11)All fees received by a company in respect of a troubled loan refinancing or restructuring shall be treated as deferred income until the loan is paid in full.
28(12)Notwithstanding subsection (11), if, under a troubled loan restructuring or refinancing, the borrower provides additional security having a market value at least equal to fifty per cent of the value of the security given under the original loan, the fees received by the company in respect of the refinancing or restructuring shall be accounted for as set out in sections 18 to 26.
Favourable Rate Financing
29(1)This section applies in respect of a loan made by a company to a third party
(a) at an interest rate that is more than two percentage points below the company’s normal lending rate for comparable loans with similar collection risks, and
(b) in connection with the disposition of real estate acquired by the company through a mortgage foreclosure, a sale under a power of sale or a loan restructuring.
29(2)The amount of the discount on a loan described in subsection (1) shall be determined by deducting the discounted value of the total future cash receipts for the loan at the contractual interest rate from the discounted value of the total future cash receipts for the loan, calculated using the company’s normal lending rate for comparable loans with similar collection risks instead of the contractual interest rate for the loan.
29(3)A discount on a loan determined under subsection (2) shall be recorded as a loss in the income accounts at the time the loan is made and the book value of the loan shall be adjusted accordingly.
Provision For Losses
30(1)Any accumulation for known, probable and possible losses shall be deducted from the applicable asset.
30(2)No sum in addition to provisions for known, probable and possible losses and bookable contingencies shall be appropriated.
30(3)Any addition to an accumulation for known, probable and possible losses shall be created by a charge to the income accounts.
31A loss of any nature shall be included in the income accounts when the loss is incurred.
IV
BORROWING OVER LIMIT
32For the purposes of subsection 36(4) of the Act, the amount by which a licensed provincial company exceeds the limit on its borrowing multiple may be invested
(a) as cash on hand,
(b) in demand deposits in
(i) banks,
(ii) licensed companies, and
(iii) such other depositories as are set out in the terms, conditions and restrictions imposed on its licence,
(c) in treasury bills of Canada or of a province,
(d) in banker’s acceptances with a remaining term until maturity of not more than one year,
(e) in term deposits, bearer deposit notes and other such instruments that
(i) are issued by banks, licensed companies and such other depositories as are set out in the terms, conditions and restrictions imposed on its licence, and
(ii) in each case, are callable on demand or mature within one hundred days,
(f) in bonds, debentures or other evidence of indebtedness that are issued or guaranteed by, or in respect of which the debt service is guaranteed by, the government of Canada or the government of a province, a territory or a municipality, or
(g) in demand loans that are fully secured by assets of the classes described in paragraphs (c) to (f) and that are made to brokers, investment dealers or securities dealers registered in Canada.
V
SUBORDINATED NOTES
33(1)Every subordinated note issued by a licensed provincial company shall state on its face
(a) the fixed maturity term,
(b) the terms of its subordination, and
(c) all restrictions applicable on redemption or payment of the note.
33(2)Every subordinated note issued by a licensed provincial company issued under section 37 of the Act shall bear a statement that
(a) redemption or payment of the subordinated note at maturity, upon default or in any other circumstances shall be suspended if the company has reasonable grounds to believe that
(i) the company is or, after the redemption or payment, would be unable to pay its liabilities as they become due,
(ii) the realizable value of the company’s assets after the redemption or payment would be less than the aggregate of its liabilities, or
(iii) the redemption or payment would cause the company to be in contravention of the Act, the regulations or any terms, conditions or restrictions imposed on its licence, and
(b) the note will not be redeemed, paid or compromised in any other way by the company until sixty days after the company has given written notice to the Superintendent.
33(3)A notice required under paragraph (2)(b) shall be given by delivering it personally to the Superintendent.
VI
LIQUIDITY
34(1)For the purposes of section 39 of the Act, a licensed provincial company shall, unless ordered otherwise by the Superintendent, maintain its liquid assets
(a) unencumbered in any of or in any combination of the forms listed in section 32, and
(b) in a total amount that is at least twenty per cent of the total amount of
(i) its deposits, and
(ii) its obligations,
that are payable in one hundred days or less.
34(2)A licensed provincial company shall prepare a liquidity return as of the last day of March, the last day of June, the last day of September and the last day of December in each year and shall file the return with the Superintendent within thirty days after the last date of the period to which it relates.
34(3)The total amount of the unencumbered liquid assets shall be calculated for the purposes of paragraph (1)(b) as provided for in sections 1 to 10 of Form 18.
34(4)The total amount of deposits and obligations that are payable in one hundred days or less shall be calculated for the purposes of paragraph (1)(b) as provided for in sections 11 to 16 of Form 18.
VII
TOTAL ASSETS
35(1)In this section
“book value” in reference to any form of asset means the cost or amortized cost of the asset after deducting accumulated depreciation, provisions or allowances for losses and received but unearned interest.
35(2)Subject to subsection (3), total assets as defined in subsection (1) of the Act shall be calculated by
(a) adding the book value of all assets of the licensed provincial company, and
(b) deducting from the amount determined under paragraph (a)
(i) the book value of intangible assets, including goodwill, copyrights, patents and any other intangible assets,
(ii) the book value of deferred charges, and
(iii) any sum by which the aggregate book value of all assets that are securities and debt obligations issued or guaranteed by a municipal, provincial, federal or any other government or any government agency exceeds the market value of those assets.
35(3)In calculating total assets under subsection (2),
(a) provisions or allowances for losses of a general nature shall be deducted from the most closely applicable class of assets,
(b) cash deposits in financial institutions shall be offset against overdrafts with financial institutions, and
(c) the equity method of accounting shall be used when calculating the company’s investment in the shares of a subsidiary.
VIII
CLASSES OF ASSETS
36(1)Subject to subsection (2) and to any terms, conditions and restrictions imposed on its licence, no licensed provincial company shall have at any time more than ten per cent of its total assets invested in any of or any combination of
(a) one or more debt instruments made under paragraph 41(1)(c) of the Act, and
(b) one or more business or commercial loans made under paragraph 41(2)(c) of the Act,
where the investment in the debt instrument or loan was made for the purpose of financing the acquisition, development and construction of real estate for commercial, industrial or residential purposes.
36(2)Subsection (1) applies to any debt instrument or loan referred to in paragraph (1)(a) or (b) that was made for the purpose of financing the acquisition, development and construction of real estate for commercial, industrial or residential purposes if
(a) the borrower’s equity interest in the total amount to be invested in the project in respect of which the instrument is entered into or the loan is made is less than twenty-five per cent of the total amount, and
(b) a term of the debt instrument or loan agreement provides
(i) for fee income to be earned by the licensed provincial company, by any subsidiary of the company or by any restricted party of the company sufficient to increase the cost of borrowing by two or more percentage points if the fee income were considered as a cost of borrowing,
(ii) for interest to be paid on the debt instrument or loan by means of an interest reserve,
(iii) for interest to be paid on the loan by means of capitalizing it as principal, or
(iv) for the licensed provincial company, any subsidiary of the company or any restricted party of the company to participate in the profit or the equity of the project in respect of which the instrument is entered into or the loan is made.
36(3)No licensed provincial company shall have at any time an amount exceeding the sum of the amount of the proceeds of its borrowings raised outside Canada and the amount representing five per cent of its total assets invested in any of or any combination of the following:
(a) bonds, debentures or other forms of indebtedness of a body corporate incorporated outside Canada;
(b) shares of a body corporate incorporated outside Canada, unless the shares are listed on a recognized Canadian stock exchange;
(c) real estate located outside Canada;
(d) loans on the security of real estate or leaseholds outside Canada; and
(e) mutual fund shares or units that are traded only by dealers who are not registered with a securities commission in Canada.
IX
PERSONAL LOANS
37No licensed provincial company shall make personal loans to one individual under paragraph 41(2)(b) of the Act that, in total, exceed at any time the lesser of
(a) two hundred and fifty thousand dollars, and
(b) the greater of
(i) one-tenth of one per cent of the total assets of the company, and
(ii) thirty thousand dollars.
X
LEASES AND CONDITIONAL SALES CONTRACTS
38The balance payable under a lease or instrument referred to in subparagraph 41(2)(d)(ii) of the Act shall not exceed the lesser of
(a) two hundred and fifty thousand dollars, and
(b) the greater of
(i) one-tenth of one per cent of the total assets of the company, and
(ii) thirty thousand dollars.
XI
SUBSIDIARIES
39For the purposes of section 48 of the Act, every licensed provincial company establishing or acquiring a subsidiary is subject to the term and condition that, before establishing a subsidiary or at least twenty-one days before acquiring a subsidiary, as the case may be, it shall file with the Superintendent
(a) where it is investing in the shares of an existing company or corporation, a certified copy of the instrument of incorporation, the by-laws and the most recent financial statements of the company or corporation, and
(b) an undertaking that the licensed provincial company will
(i) ensure, subject to any terms and conditions imposed by the Minister, that the proposed subsidiary engages only in business activities related to purposes for which it is established or acquired, as the case may be,
(ii) ensure that the proposed subsidiary, except for a proposed subsidiary to which subsection 48(3) of the Act applies, makes only investments that comply with all terms, conditions and restrictions imposed on the investments of the licensed provincial company,
(iii) provide to the Superintendent copies of the financial statements of the proposed subsidiary and such other information concerning its affairs as the Superintendent may from time to time request,
(iv) permit the Superintendent or a person appointed by the Superintendent to visit the head office and other offices of the proposed subsidiary at any time and examine its books, vouchers, securities, records and documents,
(v) notify the Superintendent forthwith of its disposition of any shares of the proposed subsidiary,
(vi) not dispose of any shares of the proposed subsidiary unless, after the disposition,
(A) it will control the subsidiary, or
(B) it will hold not more than ten per cent of any class of shares with voting rights,
(vii) not permit the proposed subsidiary to amalgamate with another company or corporation until twenty-one days after the licensed provincial company has given written notice of the proposed amalgamation and has received the written approval of the Minister, and
(viii) ensure that the subsidiary does not acquire or hold more than ten per cent of any class of shares of any other body corporate with share capital or of the equity in a body corporate without share capital.
40(1)Every licensed provincial company that has established or acquired or establishes or acquires a subsidiary shall prepare a quarterly report in conformity with subsection (2) as of the last day of March, the last day of June, the last day of September and the last day of December in each year and shall file the report with the Superintendent within thirty days after the last day of the period to which it relates.
40(2)Subject to subsection (3), a report required under subsection (1) shall set out for each subsidiary of the licensed provincial company the amount and the form of the investment by the company in the subsidiary and the amount of any guarantees of the liabilities of the subsidiary given by the company.
40(3)An investment as set out under subsection (2) shall take the form of a share, a debenture, a loan, an advance or any other security.
XII
COMMON TRUST FUNDS
41In this Part
“fund” means a common trust fund;(fonds)
“participant” means a trust or estate the moneys of which have been invested in a fund;(participant)
“participation” means the interest of a participant in a fund.(participation)
42(1)No licensed extra-provincial trust company shall invest moneys received in New Brunswick and held in trust by the company in one or more funds of the company under subsection 196(4) of the Act until a written plan of operation for the fund or funds that complies with the applicable provisions of this Part has been submitted to and approved by the Superintendent.
42(2)No licensed provincial trust company shall establish or operate a fund under section 52 of the Act
(a) unless the aggregate of trust moneys in the fund is at least two hundred thousand dollars, and
(b) until a written plan of operation for the fund or funds that complies with the applicable provisions of this Part has been submitted to and approved by the Superintendent.
42(3)A written plan of operation of a licensed trust company shall set out the manner in which the fund is to be operated and shall contain provisions as to
(a) the particulars of investment powers of, purposes of and restrictions on the fund,
(b) the computation, allocation and distribution of income,
(c) the allocation of profits and losses of the fund and their apportionment between principal and income,
(d) the amortization of premiums and discounts on bonds and other obligations,
(e) the conditions governing admissions of trust moneys to and the withdrawal of participation from the fund,
(f) the original unit of participation,
(g) the form of documentation to be used as evidence of participation,
(h) the auditing and settlement of accounts of the company respecting the fund,
(i) the basis and method of valuing the assets of the fund,
(j) the circumstances in which the fund may be terminated,
(k) the method for amending the plan of operation,
(l) the applicable law pertaining to the operation of the fund, and
(m) any other matters that should be provided for in order to establish clearly the rights of participants.
42(4)Unless the Superintendent provides otherwise in writing, a plan of operation for a licensed provincial trust company shall provide that it is subject to all applicable laws of the Province pertaining to the operation of common trust funds.
42(5)Unless the Superintendent provides otherwise in writing, a plan of operation for a licensed extra-provincial trust company shall provide that it is subject to all applicable laws of at least one province or territory of Canada pertaining to the operation of common trust funds.
42(6)An amendment to the plan of operation for a licensed provincial trust company shall be submitted to and approved by the Superintendent at least thirty days before the amendment takes effect.
42(7)An amendment to the plan of operation for a licensed extra-provincial trust company shall be filed with the Superintendent forthwith.
42(8)A fund shall be maintained in accordance with the plan of operation in relation to the fund.
Units of Participation
43(1)A fund shall be divided into units of equal value and the proportionate interest of each participant shall be expressed by the number of such units allocated to the participant.
43(2)When additional moneys are admitted to the fund, the amount so admitted shall be equal to the current value of one or more full units of the fund and the number of units shall be increased accordingly.
43(3)Each unit of participation in a fund shall have a proportionately equal beneficial interest in the fund and none shall have priority or preference over any other.
44(1)Except where permitted by the Superintendent and subject to such terms and conditions as the Superintendent may impose, no licensed trust company shall admit to a trust fund the moneys from any participant if, as a result, the participant would have an interest in the fund that exceeds ten per cent of the book value of the assets of the fund.
44(2)In applying the limitation contained in this section, if two or more trusts are created by the same settlor or settlors and at least one-half of the income or the principal or one-half of the income and the principal of each trust is payable or applicable to the use of the same person or persons, the trusts shall be treated as one participant.
Management and Ownership of Assets in a Fund
45(1)A licensed trust company shall have the management and control of any fund that it maintains.
45(2)No participant and no person having an interest in a participant shall have individual ownership of any particular assets in a fund.
45(3)All the assets of a fund shall at all times be deemed to be assets held in trust by the licensed trust company and title to the assets shall at all times be deemed to be vested solely in the company as trustee.
Admissions and Withdrawals of Participations
46(1)No licensed trust company shall admit trust moneys to or withdraw a participation or any part of a participation from a fund except on the basis of the company’s valuation of the fund and except as of a valuation date.
46(2)When a participation or any part of a participation is withdrawn from a fund, the amount withdrawn may, in the discretion of the licensed trust company, be paid in cash or rateably in kind or partly in cash and partly rateably in kind, but all payments or transfers as of any one valuation date shall be made on the same basis.
46(3)No participation may be withdrawn in part only unless the amount so withdrawn is equal to the value of one or more full units at the time of the withdrawal.
Participation Register
47A register shall be maintained for each fund during the existence of the fund and for six years after its termination, showing with respect to each participant
(a) the date of each admission of trust moneys to the fund, the number of units allocated and the value at which each unit is allocated,
(b) the date of each withdrawal, the number of units redeemed and the amount paid to the participant on redemption,
(c) the number of units currently held, and
(d) the share in any liquidating account.
Participation Certificates
48Participations in a fund may be evidenced by certificates, but no licensed trust company maintaining a fund may issue any document evidencing a direct or indirect interest in the fund in any form that purports to be negotiable or assignable.
49At least once during each period of three months, every licensed trust company shall determine the value of each fund that it maintains and of the units of participation in each fund.
Distribution of Income
50(1)The income of a fund and the apportionment of the income shall be determined as of the date of a valuation under section 49.
50(2)The income of a fund shall be distributed to participants not less frequently than quarter-yearly.
50(3)For purposes of distribution to participants, the income of a fund may be computed, at the option of the licensed trust company, on the basis of income accrued or on the basis of income actually received.
50(4)To facilitate the distribution of accrued but uncollected income of a fund, the cash principal of the fund may be used to the extent necessary.
Investments
51(1)The investments of a fund shall be kept separately from the licensed trust company’s own property and the investments shall be so identified in the books of the company to show clearly the fund to which it belongs.
51(2)Notwithstanding subsection (1), any moneys of a fund awaiting investment or distribution may be held on deposit in the savings department of a licensed trust company that takes deposits, with interest computed at the current rate and in the same manner as ordinary deposits are paid.
51(3)The total investment of a fund in
(a) guaranteed investment certificates of a trust company or other evidence of money received by a trust company,
(b) debentures of a loan company or other evidence of money received by a loan company, or
(c) bonds of, or guaranteed by, a municipal corporation,
shall not exceed, in each case, ten per cent of the book value of the fund.
51(4)The total investment of a fund in investments of or guaranteed by any one person, other than the investments referred to in subsection (3), may not exceed five per cent of the book value of the fund.
51(5)Subsections (3) and (4) do not apply to investment in obligations issued or guaranteed by the Government of Canada or the government of any province or territory of Canada.
51(6)The total number of shares held by a fund in any one class of shares of any one body corporate shall not exceed five per cent of the number of such shares outstanding.
51(7)If a licensed provincial trust company maintains more than one fund, no investment shall be made that would cause the aggregate investment for all the funds in any one class of shares of any one body corporate to exceed five per cent of the number of such shares outstanding.
Accounting Records
52A complete set of accounting records that clearly distinguish items of principal from items of income shall be maintained for each fund during the existence of the fund and for six years after its termination.
Financial Statements and Audit Report
53(1)A licensed trust company shall, at least once during each period of twelve months, prepare financial statements for each of its funds that have been approved by the Superintendent and cause an audit of each of its funds to be made by an independent accountant.
53(2)Financial statements required under subsection (1) shall include a statement of
(a) financial position for the year ending,
(b) changes in net assets,
(c) income and expenses for the year ending, and
(d) portfolio transactions.
53(3)A licensed trust company shall file a copy of the financial statements and of the audit report for an audit of each fund required under subsection (1) with the Superintendent within one hundred and forty days after the last day of each twelve month period during which the fund is operated.
53(4)A licensed trust company shall, without charge, send a copy of the financial statements and of the audit report for an audit of each fund required under subsection (1)
(a) to every co-trustee of a participant in the fund, and
(b) upon request, to every beneficiary of a participant in the fund.
53(5)The reasonable expenses of an audit required under subsection (1) shall be paid out of the fund and charged to principal and income in such proportion as the trust company considers appropriate.
Administration Fees and Expenses
54(1)No licensed trust company shall treat a fund that has been approved by the Superintendent as a separate trust fund on which commissions or other compensation is allowable.
54(2)No licensed trust company maintaining a fund referred to in subsection (1) shall
(a) make any charge against the fund for the management of the fund, or
(b) pay a fee, commission or compensation out of the fund for management.
54(3)Notwithstanding subsections (1) and (2), a licensed trust company
(a) may reimburse itself out of a fund for all reasonable expenses incurred by it in the administration of the fund, and
(b) is entitled to the management fee or other compensation to which it would otherwise be entitled in relation to managing any trust or estate the moneys from which are participating in a fund.
XIII
DUTIES OF AUDIT COMMITTEES AND OF INVESTMENT COMMITTEES
Duties of An Audit Committee
55(1)In this section
“audited financial statements” means the audited annual financial statements to be placed before the shareholders of a provincial company, including the notes to the financial statements and the auditor’s report.
55(2)For the purposes of section 109 and paragraph 117(4)(d) of the Act, the audit committee of a provincial company shall, at least once each year and at such additional times as the committee considers it necessary, fulfill the following duties:
(a) reviewing the reasonableness and significance of the financial position and reported results in the audited financial statements of the company for the purpose of making a report under subsection 117(5) of the Act;
(b) reviewing the accounting principles and practices followed by the company during the fiscal year of the financial statements reviewed under paragraph (a) and all significant changes made from the principles and practices followed during the preceding fiscal year;
(c) reviewing the audited financial statements of any subsidiaries of the company;
(d) reviewing, before submission to the board of directors, every financial report that is required to be approved by the board before submission to a regulatory body;
(e) discussing with the auditor the audit findings, any restrictions on the scope of the auditor’s work and any problems that the auditor experienced in performing the audit;
(f) reviewing the recommendations made by the auditor to the management of the company and the response made by management to the recommendations;
(g) reviewing the nature and extent of the auditor’s evaluation of the internal control systems of the company;
(h) reviewing the organization and independence of the internal auditors of the company, including the internal auditors’ goals and work plans and any problems that the internal auditors experienced in performing the audit;
(i) reviewing the recommendations respecting the improvement of accounting and internal control practices which the internal auditors considered significant and which they made to the management of the company and reviewing the response made by the management to those recommendations;
(j) monitoring the adherence by the directors, officers and employees of the company to the code of conduct, if any, of the company;
(k) inquiring into any and all alleged contraventions of the code of conduct of the company and into all circumstances that the committee considers might indicate that the company or any of its directors, officers or employees may have contravened the Act or the regulations;
(l) reviewing the adequacy of the company’s complement of employees to perform its accounting and financial responsibilities;
(m) inquiring into any change in circumstances of the company that might reasonably be expected materially and adversely to affect the company’s financial position or its ability to carry on or transact business;
(n) reporting such matters and making such recommendations to the board of directors of the company arising from its duties under paragraphs (b) to (m) as the committee considers appropriate in the circumstances; and
(o) reporting to the board of directors of the company any conflict between the auditor and the management of the company that the committee has been unable to resolve within a reasonable period of time.
Duties of An Investment Committee
56(1)In this section
“investment policies” means the guidelines established for making specified classes of investments and the investment decisions made in relation to the guidelines, including investment decisions respecting mortgage loans, acquisition, development and construction loans, personal loans, commercial loans, leasing loans, marketable securities, other financial instruments and real estate and other fixed assets.
56(2)For the purposes of section 109 of the Act, the investment committee of a provincial company shall fulfill the following duties:
(a) monitoring the investment policies of the company in order to ensure that the company is adhering to prudent investment standards, and reporting its findings to the board of directors;
(b) monitoring and recommending to the board of directors procedures to be used by the company to monitor the investment policies of every subsidiary of the company and every joint venture in which the company is a participant in order to ensure that the subsidiaries and joint ventures are adhering to prudent investment standards;
(c) recommending investment policies for the company that specify the proportion of the assets of the company that shall be allocated to specified classes of investments, and recommending procedures for implementing the policies;
(d) recommending such changes to the investment policies of the company as the committee from time to time considers necessary in order to meet changes in the investment climate;
(e) recommending the duties and powers of officers and employees of the company and of any investment subcommittees in order to determine and implement the investment policies of the company for specific classes of investments;
(f) reviewing and reporting on the investment policies determined by and the investment decisions made by officers and employees of the company and by any investment subcommittees and on the competence demonstrated by the officers and employees and by any investment subcommittees;
(g) recommending the duties and powers to be given to any investment counsellor or other professional advisor retained by the company in connection with the investment policies of the company and monitoring the decisions of the counsellor or advisor in order to ensure that they are consistent with the investment policies of the company;
(h) recommending procedures to be used by the company to monitor the activities of the company with persons who act as agents for the company and with deposit brokers who deal with the company and governing the relationships between the company and its agents and deposit brokers;
(i) reviewing every valuation performed under paragraph 6(5)(b) or subsection 6(6) in order to
(i) ensure that it was performed by a valuator who, in the opinion of the committee, has a demonstrated ability to evaluate investments with independence and proficiency, and
(ii) ensure, by examining the valuation method used, that the valuation is based on sufficiently current information;
(j) reporting every deviation from the investment policies of the company at the first meeting of the board of directors after the committee becomes aware of the deviation;
(k) reviewing all management reports concerning compliance by the company and its directors, officers and employees with the Act, the regulations and the terms, conditions and restrictions imposed on the licence of the company; and
(l) monitoring the investment policies of the company to ensure that the established investment limits do not exceed the limits established under the Act and regulations or on the company’s licence and reporting its findings to the board of directors.
XIV
FINANCIAL STATEMENTS
57(1)The degree of disclosure required in the unconsolidated financial statements of a provincial company to be placed before an annual meeting of shareholders under subsection 137(3) of the Act is as set out in this Part.
57(2)The degree of disclosure required for financial statements of a provincial company that are prepared on a consolidated basis and are to be placed before an annual meeting of shareholders under subsection 137(3) of the Act is as set out in this Part, allowing for appropriate consolidation adjustments.
58(1)Notwithstanding any other provision in this Part, a provincial company is not required to disclose in its financial statements a matter that, in all the circumstances of the provincial company, is relatively insignificant.
58(2)A person determining whether or not a matter is relatively insignificant under subsection (1) shall take into consideration the effect of the authorized borrowing multiple on the capital base of the company.
Statement of Income
59(1)A statement of income of a provincial company shall set out separately at least
(a) revenue from mortgages, showing separately
(i) interest earned on mortgages, and
(ii) any other mortgage revenue, including amortized fee income,
(b) earnings from investments in subsidiaries,
(c) earnings from investments in any securities dealer if the relationship of the securities dealer to the company is that of a subsidiary or a corporation under significant influence,
(d) revenue, excluding gains or losses on sales, from investments in securities other than those referred to in paragraphs (b) and (c),
(e) revenue from loans to individuals, including investments made under subparagraph 41(2)(d)(ii) of the Act,
(f) revenue from loans to entities other than individuals, including investments made under paragraph 41(1)(g) or subparagraph 41(2)(d)(i) of the Act,
(g) revenue from the administration of estates, trusts and agencies,
(h) net commissions from real estate sales after payment of commissions to real estate brokers other than the company,
(i) revenue from real estate held for investment,
(j) net revenue from real estate held for sale after deducting depreciation, property taxes and all other operating expenses,
(k) net gains or losses from futures, options, short selling or similar instruments acquired other than for hedging purposes,
(l) net gains or losses on the sale of investments or other assets,
(m) operating revenue not included under paragraphs (a) to (l),
(n) interest expense on debentures, notes, certificates of indebtedness, bank or other borrowings and moneys received for guaranteed investments, savings or other deposits,
(o) salaries, pension contributions and other staff benefits,
(p) operating expenses, including depreciation and amortization, of office premises, equipment and leasehold improvements held for the company’s own use,
(q) operating expenses, including depreciation, of real estate held for investment,
(r) operating expenses not included under paragraphs (n) to (q),
(s) amounts recorded as amortization or write-off of intangible assets,
(t) provisions for known, probable and possible losses of any kind,
(u) income or loss before income taxes and extraordinary items,
(v) income taxes, indicating the amount, if any, by which current income taxes have been increased or decreased as a result of tax deferrals,
(w) income or loss before extraordinary items,
(x) extraordinary items shown separately if they are material, less related income taxes, if any,
(y) net income or loss for the period, and
(z) earnings per share.
59(2)Notwithstanding subsection (1), an item required to be set out on an income statement may be set out in the notes to the financial statements or in another financial statement or, if the amount of the item is not significant, it may be combined with another item on the income statement.
Statement of Retained Earnings
60A statement of retained earnings of a provincial company shall set out separately at least
(a) the balance of the retained earnings or deficit at the end of the preceding period,
(b) the additions to and deductions from the retained earnings or deficit during the period to which the statement relates, including
(i) the net income or loss for the period,
(ii) the dividends declared on common shares and, shown separately, on shares other than common shares, and
(iii) the adjustments for the preceding period, including a description, and
(c) the balance of the retained earnings or deficit at the end of the period to which the statement relates.
Statement of Changes in Financial Position
61A statement of changes in financial position of a provincial company shall set out separately
(a) the changes in cash and cash equivalents resulting from the activities of the company during the period to which the statement relates,
(b) the components of cash and cash equivalents, and
(c) cash flows, including cash flows from the company’s operating activities, financing activities and investing activities set out separately.
Balance Sheet
62(1)A balance sheet of a provincial company shall set out separately as assets at least
(a) deposits or similar instruments with regulated financial institutions other than the company, cash and bank term deposits,
(b) securities, showing separately at least
(i) securities issued or guaranteed by the Government of Canada or the government of a province or territory of Canada, stating the basis of valuation and parenthetically indicating their aggregate market value,
(ii) short term paper not included under paragraph (a), stating the basis of valuation and parenthetically indicating its aggregate market value,
(iii) bonds, debentures and similar securities not included under paragraph (a) or subparagraph (i) or (ii), stating the basis of valuation and parenthetically indicating their aggregate market value,
(iv) shares, other than shares of subsidiaries and securities dealers, distinguishing common shares from other shares, stating the basis of valuation and parenthetically indicating their aggregate market value,
(v) investment in subsidiaries, valued on the equity method, and
(vi) investment in securities dealers, where the relationship of the securities dealer to the company is that of a subsidiary or a corporation under significant influence, valued on the equity method,
(c) the amounts that are owing to the company, whether on account of a loan or otherwise, from subsidiaries and other equity accounted-for investees,
(d) investment income that is due and accrued if it is not included with investments,
(e) advances to and fees receivable from estates, trusts and agencies,
(f) loans to individuals, including investments under subparagraph 41(2)(d)(ii) of the Act,
(g) loans to entities other than individuals, including investments under subparagraph 41(2)(d)(i) or paragraph 41(1)(g) of the Act,
(h) mortgages, stating the basis of valuation,
(i) office premises, equipment and leasehold improvements, stating
(i) the basis of valuation,
(ii) the amount of accumulated allowance for depreciation and amortization, and
(iii) if valued on the basis of an appraisal,
(A) the date of the appraisal, and
(B) if the appraisal took place within five years before the date to which the balance sheet is made up, the disposition in the company’s accounts of any amount added to or deducted from the assets on appraisal,
(j) real estate held for investment, stating the basis of valuation and the amount of the accumulated allowance for depreciation,
(k) real estate held for sale, stating the basis of valuation and the amount of accumulated allowance for depreciation, and
(l) any other assets not included under paragraphs (a) to (k).
62(2)A balance sheet of a provincial company shall set out separately as liabilities at least
(a) liabilities in respect of demand deposit accounts,
(b) liabilities for moneys received under subsection 34(1) of the Act, other than liabilities in respect of demand deposit accounts,
(c) interest due and accrued on deposits, debentures or guaranteed certificates, if not included with the corresponding liability,
(d) bank loans and overdrafts, including interest due and accrued,
(e) money borrowed under section 38 of the Act, including interest due and accrued,
(f) subordinated notes,
(g) liability for current income taxes,
(h) dividends declared but not paid,
(i) deferred income,
(j) amounts owing by the company to its directors, officers and shareholders, excluding amounts owing on deposits,
(k) amounts owing by the company to subsidiaries and to other equity accounted-for investors,
(l) liabilities not included under paragraphs (a) to (k), segregating those that arose other than in the ordinary course of business, and
(m) deferred income taxes.
62(3)A balance sheet of a provincial company shall set out separately as shareholder’s equity at least
(a) the authorized capital of the company, giving the number of each class of shares and a brief description of each such class and indicating
(i) the dividend rates on preferred shares and whether or not they are cumulative,
(ii) the redemption and retraction prices of redeemable or retractable shares, and
(iii) the existence of conversion provisions and details of any changes during the year,
(b) the issued capital of the company, giving the number of shares of each class issued and outstanding and showing the number of shares of each class issued since the date of the last balance sheet and the amount received, together with the arrears, if any, of dividends for cumulative preferred shares, and
(c) retained earnings or deficit.
62(4)Notwithstanding subsections (1) to (3), an item required to be set out on the balance sheet may be set out in the notes to the financial statements or in another financial statement or, if the amount of the item is not significant, it may be combined with another item on the balance sheet.
Notes to the Financial Statements
63(1)The financial statements of a provincial company shall disclose the following matters where they arise:
(a) a description of all significant accounting policies adopted by the company;
(b) particulars of any change in accounting principles or practice or in the method of applying any accounting principle or practice made during the period to which the statements relate that affects the comparability of any of the statements with any of those of the preceding period and the effect of any such change upon the income or loss for the period;
(c) contractual obligations and commitments by the company to make expenditures that are abnormal in relation to the company’s financial position or usual business operations;
(d) contractual obligations in respect of long term operating leases including, in the period in which a transaction is effected, the principal details of any sale and lease-back transaction;
(e) contingent liabilities that might involve losses not provided for in the accounts, stating their nature and making an estimate of the amount of the contingent loss or stating that an estimate cannot be made and stating whether any settlement resulting from the resolution of the contingency is expected to be accounted for as a prior period adjustment or as a charge to profit and loss in the period in which the settlement occurs;
(f) if the company has contracted to issue shares or has given an option, right or warrant to purchase shares, the class and number of shares affected and the price and date of issue of the shares or of the exercise of the option or like instrument;
(g) the amount of any unfunded obligation of the company to its employees’ pension fund, indicating the manner in which the company proposes to satisfy the obligation;
(h) any event or transaction occurring between the date of the financial statements and the date of their completion that does not relate to conditions that existed at the date of the financial statements but that will result in significant changes to assets or liabilities in the subsequent period or is likely to or may have a significant effect on future operations of the company;
(i) the amount of any loans made to persons or of any investments made in persons, contrary to Part X of the Act, at any time during the period to which the statements relate;
(j) the basis of translation of any amounts from another currency into Canadian currency, together with the accounting treatment used for any unrealized gains or losses related to those amounts;
(k) foreign currency restrictions that affect the assets of the company;
(l) any liability secured on any asset of the company, stating the nature and amount of the encumbrance on each asset and identifying the lender if the lender is an affiliate;
(m) any default by the company in principal, interest, sinking fund or redemption provisions with respect to an issue of its debt obligations;
(n) the amount of any arrears of dividends on any class of shares and the date to which the dividends were last paid;
(o) any restriction in the instrument of incorporation or by-laws of the company or by contract on the payment of dividends;
(p) particulars, in summary form, of amounts recorded in the financial statements as contributed surplus;
(q) particulars, in summary form, of any assets earmarked and set aside under subsection 34(4) of the Act;
(r) particulars for reconciling the effective income tax rate with the statutory income tax rate;
(s) information distinguishing the company’s total operations by country and by profit centre function;
(t) details of any economic dependency of the company on a person because the company is conducting a significant volume of business with the person and, separately, details of any circumstance that might call into question the future viability of the company;
(u) details of all transactions entered into with any related parties, setting out the amounts due to or from related parties and including a description of the nature and extent of the transaction, of the nature of the relationship and of all such transactions that constitute contraventions of the Act or the regulations;
(v) details with respect to the method used to account for any business combination, the net assets brought into the business combination, the consideration given and other pertinent information;
(w) details with respect to any prior period adjustment, including a description of the adjustment and its effect on current and prior periods;
(x) details, by major asset class, of the aggregate carrying value of loans that were subject to troubled loan refinancing or restructuring during the period to which the statements relate; and
(y) details, by major asset class, of provisions for known, probable and possible losses stated in the form of a continuity schedule, showing opening balances, changes during the period to which the statements relate and closing balances.
63(2)Matters set out in subsection (1) may be disclosed by way of notes to the financial statements.
XV
SELF DEALING
64For the purposes of paragraph 180(1)(h) of the Act, a licensed provincial company may sell to or redeem from a restricted party its own subordinated notes and its own shares.
65For the purposes of paragraph 180(3)(d) of the Act and subject to Part III of the Act, a licensed provincial company or a subsidiary of a licensed provincial company may enter into sales to and purchases from a restricted party of
(a) treasury bills issued by the Government of Canada or the government of a province or territory of Canada,
(b) mortgage loans that are insured by the Canada Mortgage and Housing Corporation or the Mortgage Insurance Corporation of Canada and that are not in default,
(c) bonds issued or guaranteed by the Government of Canada or the government of a province or territory of Canada, and
(d) certificates or notes, other than stocks, bonds and subordinate debentures, that are issued or guaranteed by a financial institution that is not a restricted party of the licensed provincial company, that are issued in Canada and that have a term to maturity when issued of one year or less,
if the sales and purchases are undertaken at readily identifiable prevailing market rates and if the instruments are transferable.
XVI
LOANS TO EMPLOYEES AND EMPLOYEES’ SPOUSES AND CHILDREN
66For the purposes of subsection 180(2) of the Act, a licensed provincial company may make loans to employees as described in that subsection if the amount of each loan does not exceed thirty thousand dollars.
XVII
CUSTODY AND SAFEKEEPING OF SECURITIES, PROPERTY AND TRUST ASSETS
67(1)This Part applies to securities, property and other assets registered in the name of or held by a provincial company as trust assets under administration, as collateral for a loan or as an acquisition for its own account.
67(2)Notwithstanding subsection (1), if a licensed provincial company enters into a securities lending arrangement with a financial institution or securities dealer, this Part applies in respect of securities received by the company as a result of the arrangement but does not apply in respect of securities lent by the company under the arrangement.
Custody
68(1)In this section
“assets not retained in Canada” means(actifs non détenus au Canada)
(a) bonds, debentures and other forms of indebtedness of a body corporate that is incorporated outside Canada,
(b) shares of a body corporate that is incorporated outside Canada unless the shares are listed on a Canadian stock exchange,
(c) real estate located outside Canada,
(d) loans that are secured by real estate or leaseholds outside Canada, and
(e) mutual fund shares or units that are traded only by dealers who are not registered with a securities commission in Canada;
“custodian” means a company, bank or other institution with which securities, property or trust assets have been placed for custody under this section.(conservateur)
68(2)Subject to subsections (3) and (4), documents evidencing ownership of assets to which this Part applies shall be placed in Canada in the custody of a company, a bank or the Bank of Canada.
68(3)Where a court order or an instrument that creates a fiduciary duty contains a direction respecting securities, property or trust assets that is inconsistent with subsection (2), the order or instrument prevails.
68(4)Documents evidencing ownership of assets not retained in Canada that are acquired by a licensed provincial company for its own account may be placed in the custody of an institution in a jurisdiction outside Canada that
(a) is recognized by the laws of the jurisdiction as a bank, a trust company or the equivalent of a bank or trust company,
(b) is empowered by the laws of the jurisdiction to have custody of assets,
(c) is regulated as a bank, a trust company or the equivalent of a bank or trust company by the government of or an agency of the government of the jurisdiction, and
(d) has shareholders’ equity as reported in its audited financial statements for its last complete fiscal year of not less than the equivalent of $5,000,000.00 Canadian.
68(5)No licensed provincial company shall place securities, property or trust assets with a custodian under subsection (2), (3) or (4) until it has obtained an agreement in writing with the custodian governing the custody of the securities, property or trust assets and setting out the obligations of the custodian and the cost, if any, of the services to be provided to the company.
69(1)In this section
“book-based system” means a system for the central handling of securities within which all securities in a class or series of any issuer that are deposited into the system are treated as fungible and may be transferred or pledged by bookkeeping entry without the actual delivery of the securities.
69(2)The ownership rights of a person in and the existence of a security or government debt instrument may be established by the delivery to a licensed provincial company of
(a) a certificate respecting the issuance and registration of the security or government debt instrument, or
(b) a statement of account for the security or government debt instrument given by a recognized securities depository in Canada that is authorized by law to operate a book-based system or by a comparable institution in a foreign jurisdiction that is authorized by law to operate a transnational book-based system.
Safekeeping
70(1)Subject to subsection (2) and subsections 73(2) and (3), trust assets shall be registered and held by a licensed provincial company or its nominee in trust for the beneficial owner or in the name of the beneficial owner.
70(2)Where a court order or an instrument that creates a fiduciary duty contains a direction respecting securities, property or other assets that is inconsistent with subsection (1) or 73(2) or (3), the order or instrument prevails.
71A licensed provincial company holding securities or property as collateral for a loan shall obtain from the borrower
(a) an assignment of the borrower’s rights in the securities or property,
(b) in the case of securities, a power of attorney and proof of the assignability of the securities, and
(c) in the case of property, proof of the ownership rights of the borrower.
72Subject to subsections 73(2) and (3), a licensed provincial company holding securities or government debt instruments for its own account shall, within fifteen days after settlement, forward the securities for registration in the name of the licensed provincial company or its nominee.
73(1)In this section
“money market instrument” means a publicly-traded debt instrument issued by a body corporate or a government, maturing within three years after its date of issue, that
(a) is purchased by a licensed provincial company for its own account or as a trust asset, or
(b) is held by a licensed provincial company as collateral for a loan payable within the year following the day the loan was made.
73(2)Subject to subsection 70(2), Canadian money market instruments that are purchased by a licensed provincial company for its own account or as trust assets may be held in registered form accompanied by a power of attorney appointing the company or in bearer form.
73(3)Subject to subsection 70(2), a licensed provincial company may hold securities and government debt instruments other than Canadian money market instruments that it intends to dispose of within ninety days after acquisition in registered form accompanied by a power of attorney appointing the company or in bearer form but, after the expiration of the ninety days, shall conform to the applicable requirements of subsection 70(1) and sections 71 and 72.
73(4)Notwithstanding section 72 and subsection (3), if a licensed provincial company acquires securities or government debt instruments for its own account
(a) that are issued only in bearer form, the company may hold the securities or government debt instruments in bearer form, and
(b) that are Canadian money market instruments in bearer form, the company may hold the securities or government debt instruments in bearer form.
74A licensed provincial company shall take reasonable and prudent action to ensure that ownership rights of or security interest in securities, property and other assets that are registered in the name of the company or its nominee or are held by the company are protected under provincial law.
75(1)Every licensed provincial company that intends to register securities, property or other assets in the name of a nominee shall notify the Superintendent of the name of its nominee before making the first such registration.
75(2)A licensed provincial company shall notify the Superintendent within thirty days after any change in the name of its nominee, giving the Superintendent the name of the new nominee.
XVIII
DEPOSIT AGENTS
76In this Part
“deposit agent” means(agent de dépôt)
(a) in relation to a provincial company, a person who, not being an employee of the company, receives or accepts money or any other funds from the public for the purpose of transmission to and deposit with the company, and
(b) in relation to an extra-provincial company, a person who, not being an employee of the company, receives or accepts money or any other funds from the public in New Brunswick for the purpose of transmission to and deposit with the company;
“remuneration rates” includes commissions, overrides, bonuses and expenses paid by a licensed company to a deposit agent.(taux de rémunération)
77(1)A deposit agent who receives or accepts money or any other funds on behalf of a licensed company from or on behalf of a depositor shall issue a receipt in the name of the licensed company to the depositor and shall provide the company with a copy of the receipt.
77(2)All money and all other funds received or accepted by a deposit agent from or on behalf of a depositor shall be payable only to a licensed company or shall be accompanied by a written direction from the depositor authorizing the deposit agent to deposit the money or other funds with a licensed company.
78(1)Every licensed extra-provincial company shall file, with the annual return filed under section 200 of the Act,
(a) a list of the names and addresses of all deposit agents for receiving or accepting money or any other funds in New Brunswick on its behalf during the financial year to which the annual return relates, and
(b) a schedule or schedules of remuneration rates for such deposit agents, expressing the rates in dollars or as a percentage of deposits, whichever is applicable, for all the deposit agents and indicating the number of deposit agents to which each schedule applies.
78(2)Every licensed provincial company shall file, with the annual return filed under subsection 61(1) of the Act,
(a) a list of the names and addresses of all deposit agents for receiving or accepting money or any other funds on its behalf during the financial year to which the annual return relates, and
(b) a schedule or schedules of remuneration rates for such deposit agents, expressing the rates in dollars or as a percentage of deposits, whichever is applicable, for all the deposit agents and indicating the number of deposit agents to which each schedule applies.
78(3)Every licensed company shall file with the Superintendent a written notice of all changes to its schedule or schedules of remuneration rates filed under subsection (1) or (2) and each change made to its remuneration rate applicable to a deposit agent at least ten days before the changed rates come into effect.
XIX
PUBLIC FILES
79For the purposes of subsection 68(1) of the Act, a file maintained by the Superintendent on a licensed company shall contain the following information:
(a) particulars of the company’s instrument of incorporation;
(b) particulars of any Orders in Council issued under the Act with respect to the company;
(c) particulars of any orders issued under the Act with respect to the company, unless the order provides otherwise;
(d) particulars respecting the licence of the company;
(e) particulars of any court orders or certificates of conviction issued against the company as a result of proceedings commenced under the Act or the regulations;
(f) information concerning whether or not
(i) the company is a member institution within the meaning of the Canada Deposit Insurance Corporation Act (Canada), or
(ii) the company’s deposits are insured by a public agency approved by the Minister;
(g) particulars of approvals pertaining to common trust funds, to mutual funds, to registrations as brokers, salesmen and sub-agents and to trade in securities under subsections 52(3), 53(1), (2) or (3) or 196(4) to (6) of the Act;
(h) for a provincial company, the name of the company’s auditor and, if a vacancy has occurred in the position of auditor, the existence of the vacancy;
(i) for a provincial company, particulars of any certificate of discontinuance, letters patent dissolving the company or certificate pertaining to dissolution;
(j) for an extra-provincial company, particulars of the appointment of agent, powers of attorney and any notices of changes in the agent’s address;
(k) for a provincial company, a list of current members of the board of directors, board of management or other governing body, Form 5 pertaining to the registered office and sections 1 to 8 of Form 6; and
(l) for an extra-provincial company, Form 12.
XX
APPEALS
80The Minister shall, within sixty days after being advised of an appeal by the Superintendent under subsection 234(1) of the Act, advise the person appealing in writing of
(a) whether the appeal is to be heard by the Minister or by an appeal board,
(b) the time, date and location of the appeal, and
(c) any other information concerning the appeal that the Minister considers appropriate.
XXI
FEES
81The fees payable under the Act and this Regulation are as follows:
(a)for review by Minister of application for letters patent under subsection 11(1) of the Act..............
$  500.00
 
(b)for issue of letters patent under subsection 11(1) of the Act..............
$2,000.00
 
(c)for issue of supplementary letters patent under subsection 11(5) of the Act..............
$1,000.00
 
(d)for issue of supplementary letters patent under subsection 11(10) of the Act..............
$  500.00
 
(e)for review by Superintendent of name of a company in relation to subsection 19(1) or 192(1) of the Act..............   
$   30.00
 
(f) for issue of restated letters patent under subsection 24(3) of the Act..............
$  250.00
 
(g)for issue of letters patent of continuance under subsection 26(2) of the Act..............
$1,000.00
 
(h)for issue of certificate of discontinuance under subsection 28(5) or 29(5) of the Act..............
$  200.00
 
(i)for review by Superintendent of application to increase the total amount that may be borrowed or received by a licensed provincial company under subsection 36(3) of the Act..............
$1,000.00
 
(j)for issue of supplementary letters patent to designate a series of shares under subsection 73(5) of the Act..............
$  250.00
 
(k)for review by Minister of application for consent to transfer or issue shares under subsection 88(2) of the Act..............
$1,000.00
 
(l)for issue of letters patent of amalgamation under subsection 152(1) of the Act..............
$1,000.00
 
(m)for issue of letters patent dissolving a company under subsection 163(8) of the Act..............
$  100.00
 
(n)for review by Minister of application for first licence under subsection 211(1) or subparagraph 212(2)(a)(i) of the Act..............
$3,000.00
 
(o)for issue of amended licence reflecting change of name under subsection 211(4) of the Act..............
$  500.00
 
(p)for review by Minister of application for change in or amendment to a licence under paragraph 212(1)(b) or (c) of the Act..............
$1,000.00
 
(q)for issue of a second or subsequent licence under subsection 215(2) of the Act..............
$3,000.00
 
(r)for issue of certificate of status..............
$   50.00
 
(s)for copies of documents, per copy..............
$   25.00
 
(t)for certified copies of documents, per copy..............
$   50.00
93-112
XXII
FORMS
82An application for letters patent under subsections 11(1) and 12(1) of the Act shall be in Form 1.
83An application for supplementary letters patent under subsections 11(5) and 12(1) of the Act shall be in Form 2.
84An application for restated letters patent under subsection 24(2) of the Act shall be in Form 3.
85An application for letters patent of continuance under sections 25 and 26 of the Act shall be in Form 4.
86A notice of a change of address of a registered office of a provincial company under subsection 56(4) of the Act shall be in Form 5.
87A return or notice respecting directors of a provincial company under subsection 64(1) or (2) of the Act shall be in Form 6.
88An application for supplementary letters patent designating a series of shares under subsection 73(4) of the Act shall be in Form 7.
89A declaration of information of a person in whose name a share is held or beneficially owned under section 89 of the Act shall be in Form 8.
90An application for letters patent of amalgamation under subsection 151(2) of the Act shall be in Form 9.
91An appointment of agent and power of attorney under subsection 193(2) or paragraph 211(9)(a) of the Act shall be in Form 10.
92A notice of change of agent’s address under subsection 193(4) of the Act shall be in Form 11.
93A notice of an extra-provincial company under paragraph 198(c) or (d) of the Act shall be in Form 12.
94A statement relating to amalgamation of extra-provincial companies under subsection 207(1) or 208(1) of the Act shall be in Form 13.
95An application for a first licence under subsection 211(11) or subparagraph 212(2)(a)(i) of the Act shall be in Form 14.
96An application to change or amend a licence under subparagraph 212(2)(a)(i) of the Act shall be in Form 15.
97An application for a second or subsequent licence under section 215 of the Act shall be in Form 16.
98A notice of appeal under subsection 234(1) of the Act shall be in Form 17.
99A liquidity return for a licensed provincial company under subsection 34(2) shall be in Form 18.
N.B. This Regulation is consolidated to December 20, 2019.