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FINANCIAL INSTITUTIONS ACT — Continued
[RSBC 1996] CHAPTER 141
Division 1 — Directors and Officers of Financial Institutions
97 A financial institution must have at least 5 directors, and, in the case of a trust company or an insurance company, at least 1/3 of the directors must be unaffiliated directors.
98 The persons who are the proposed first directors of a trust company or insurance company immediately before registration of its memorandum and articles under section 15 are the first directors of the trust company or insurance company.
99 (1) Without limiting section 114 of the Company Act as it applies for the purposes of this Act, no person is qualified to become or act as a director or officer of a financial institution who is a public servant whose duties relate to financial institutions.
(2) Without limiting section 130 of the Company Act as it applies for the purpose of this Act, if the superintendent is satisfied that a director or officer of a financial institution or of its subsidiary
(a) because of section 133 (2) of the Company Act, is not qualified to be an officer,
(b) because of subsection (1), is not qualified to be a director or officer,
(c) within the last 5 years has been bankrupt in Canada or elsewhere,
(d) has a conflicting interest that prevents the director or officer from properly discharging the duties as director or officer,
(e) is contravening or has contravened an undertaking given to or an order made by the superintendent, or
(f) is an individual who ought not to be in a position to control or influence a financial institution,
the superintendent may order that the director or officer cease to be a director or officer of the financial institution; and on the date of the order the director or officer ceases to be a director or officer of the financial institution.
(3) When an individual ceases to be a director or officer of a financial institution under subsection (2), then, despite the Company Act as it applies for the purposes of this Act, the individual is not eligible to again be or act as a director or officer of a financial institution without first applying for and receiving the consent of the superintendent.
(4) A financial institution must deliver written notice immediately to the superintendent of the resignation, removal, election or appointment of a director or senior officer.
(5) The superintendent may require a financial institution to provide any information the superintendent considers necessary to determine if there are grounds to take action under subsection (2).
100 Without limiting section 99 of this Act or section 130 of the Company Act as it applies for the purposes of this Act, a director of a credit union ceases to hold office when the director
(a) is not qualified under section 83 (3) of the Credit Union Incorporation Act,
(b) is not, or ceases to be, eligible to be insured as required under section 206 of this Act,
(c) being a person who is required under section 84 (3) of the Credit Union Incorporation Act to complete a director training program, fails to complete the program within the period specified under section 84 (2) (b) of that Act.
101 (1) A director or officer of a financial institution, in exercising the powers and performing the functions of a director or officer, must
(a) act honestly, in good faith and in the best interests of the financial institution, and
(b) exercise the care, diligence and skill of a reasonably prudent person under comparable circumstances,
and in doing so must take into account the interests of shareholders, depositors, if any, and policy holders, if any, and, without limiting this, of those to whom the directors owe a fiduciary duty.
(2) The provisions of this section are in addition to, and not in derogation of, any enactment or rule of law or equity relating to the duties or liabilities of directors of a corporation.
102 (1) Except for an action by or on behalf of the financial institution to procure a judgment in favour of the financial institution, a financial institution may indemnify
(a) a director or officer of the financial institution,
(b) a former director or officer of the financial institution, or
(c) an individual who, at the request of the financial institution, is or was a director or officer of a corporation of which the financial institution is or was a member or creditor,
against any costs, charges and expenses, including an amount paid to settle an action or proceeding or to satisfy a judgment, reasonably incurred for any civil, criminal or administrative action or proceeding, whether threatened, pending, continuing or completed, to which the director or officer is or may be made a party because of being or having been a director or officer of the financial institution or corporation, if
(d) the director or officer acted honestly and in good faith with a view to the best interests of the financial institution or corporation, as the case may be, and
(e) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer had reasonable grounds for believing that the conduct was lawful.
(2) With the approval of a court, a financial institution may indemnify a person referred to in subsection (1) (a) or (b) for an action, whether threatened, pending, continuing or completed, by or on behalf of the financial institution to procure a judgment in favour of the financial institution, to which the person is or may be made a party because of being or having been a director or officer of the financial institution, against any costs, charges and expenses reasonably incurred in connection with the action if the conditions set out in subsection (1) (d) and (e) are fulfilled.
(3) A financial institution must indemnify a person referred to in subsection (1) (a) or (b) who has been substantially successful on the merits in the outcome of a civil, criminal or administrative action or proceeding, to which the person is made a party because of being or having been a director or officer of the financial institution, against all costs, charges and expenses reasonably incurred for the action or proceeding if the conditions set out in subsection (1) (d) and (e) are fulfilled.
(4) A financial institution or a person referred to in subsection (1) (a), (b) or (c) may apply to a court for an order approving an indemnity under this section and the court may make any order it thinks fit.
(5) An applicant under subsection (4) must give the commission not less than 14 days' notice of the application and the commission is entitled to appear and be heard in person or by counsel.
(6) On an application under subsection (4), the court may order notice to be given to any interested person and that person is entitled to appear and be heard in person or by counsel.
(7) A financial institution may purchase and maintain insurance for the benefit of a person referred to in subsection (1) (a), (b) or (c) against any liability incurred as a director or officer.
103 (1) A quorum
(a) of a meeting of directors of a financial institution consists of the greater of
(i) 3 directors, or
(ii) a majority of the directors, and
(b) of a meeting of a committee consists of a majority of the individuals comprising the committee.
(2) Even though
(a) sufficient directors to form a quorum are present at a meeting of the directors of a trust company or insurance company, or
(b) sufficient individuals to form a quorum are present at a meeting of a committee that is required to have unaffiliated directors as members,
there is not a quorum unless at least one of them is an unaffiliated director.
104 If a director or officer of a financial institution or of an affiliate of a financial institution knows or reasonably ought to know that information is confidential to the financial institution, or to any affiliate of the financial institution the director or officer must not
(a) disclose the information, or
(b) enter into a transaction in which the director or officer makes use of the information,
in order, directly or indirectly, to obtain a benefit or advantage for the director, officer or anyone else other than the financial institution or any affiliate of it.
105 Before commencing duties a director or senior officer of a financial institution must complete and submit to the superintendent a personal information return in the prescribed form and disclosing the prescribed information.
106 The directors of a financial institution, if requested to do so by its auditor, must call a general meeting of members or a meeting of directors within 30 days after the request, to consider a report made by the auditor regarding any matter arising out of the financial affairs of the financial institution.
107 (1) The superintendent by order may require a meeting of the directors of a financial institution for the purpose of considering matters specified in the order within the time specified in the order; and on receiving the order the directors must inform the superintendent in advance of the time and place of the meeting.
(2) The superintendent may attend and be heard at a meeting ordered under subsection (1).
108 (1) A director of a financial institution who
(a) resigns,
(b) receives a notice or otherwise learns of a meeting of members called for the purpose of removing the director from office, or
(c) receives a notice or otherwise learns of a meeting of directors or members at which another person is to be appointed or elected to fill the office of director because of the director's resignation or removal
is entitled to submit to the financial institution a written director's statement giving the reasons for the resignation or the reasons why the director opposes any proposed action or resolution.
(2) If a director of a financial institution resigns as a result of a disagreement with the other directors or the management of a financial institution and does not take action under subsection (1), the director must submit to the superintendent a written director's statement giving the reasons for the resignation.
109 (1) On receiving a written director's statement under section 108 (1), the financial institution must deliver it to the superintendent immediately, and, unless the directors consider on reasonable grounds that delivery of the statement would materially and adversely affect the financial institution's financial viability, the financial institution must also deliver the statement immediately to its members who are entitled to notice of meetings.
(2) If the directors, on the basis set out in subsection (1), decide against delivery of the statement to the members, they must so inform the superintendent who, despite that decision, may order the financial institution to deliver the statement immediately to its members who are entitled to notice of meetings.
(3) A financial institution or person acting on its behalf does not incur any liability only because of circulating a written director's statement in compliance with subsection (1).
110 (1) The remuneration, if any, of the directors of a financial institution in relation to their service as directors may be established by ordinary resolution.
(2) The members of a financial institution, by special resolution, may permit the remuneration, if any, of the directors to be established by the directors.
111 (1) Subject to subsections (2) and (3) and the charter of the financial institution, the directors of a financial institution may delegate any of their powers to a committee appointed or elected by them.
(2) A committee does not have authority to
(a) fill a vacancy among the directors or the members of the audit committee, or the investment and loan committee, or in the office of the auditor, or appoint or remove the chief operating officer, however designated, the chief executive officer, however designated, the chief financial officer, however designated, the chair of the board or the president of the company,
(b) issue securities except in the manner and on the terms authorized by the directors,
(c) declare dividends,
(d) purchase, redeem or otherwise acquire shares issued by the financial institution,
(e) approve an information circular,
(f) approve a take over bid circular, directors' circular or issuer bid circular,
(g) approve a financial statement, or
(h) adopt, amend or repeal directors' bylaws.
(3) If the directors of a financial institution appoint or elect a committee, the committee must consist of not fewer than 3 individuals and, in the case of a trust company or insurance company, at least one of them must be an unaffiliated director.
(4) A committee appointed by the directors of a trust company or insurance company must not conduct any business unless at least one unaffiliated director is present at the meeting.
112 (1) The directors of a financial institution must elect from among themselves a conduct review committee consisting of at least 3 directors; and, in the case of a trust company and an insurance company, 2/3 of the committee members must be unaffiliated directors.
(2) The conduct review committee, in addition to the duties set out in Part 5, must establish written procedures
(a) to provide disclosure under section 90 to customers of the financial institution, and
(b) designed to prevent conflicts of interest and to resolve them if they occur, setting out in those procedures techniques for the identification of potential conflict of interest situations and for restricting the flow of confidential information and ensuring compliance with section 95.
(3) The conduct review committee at intervals of not more than 2 years must review the written procedures established under subsection (2).
Division 2 — Auditors and Audit Committees of Financial Institutions
113 Every financial institution must have an auditor who is qualified under
(a) section 180 of the Company Act as it applies for the purposes of this Act, and
(b) the regulations.
114 For the purpose of section 183 of the Company Act as it applies for the purposes of this Act, the fact that the auditor of a trust company or credit union or the auditor's partner or employee is a depositor in the trust company or credit union or holds membership shares in the credit union does not by itself affect the independence of the auditor from
(a) the trust company, or
(b) the credit union,
or from its affiliates and its directors and officers.
115 (1) The directors of a financial institution must appoint or elect at their first meeting following each annual general meeting a committee, to be known as the audit committee, composed of not fewer than 3 individuals, of which
(a) a majority of the members must not be officers or employees of the financial institution or of an affiliate of the financial institution, and
(b) in the case of a trust company or an insurance company, not less than 1/3 of the members must be unaffiliated directors,
to hold office until the next annual general meeting.
(2) The members of the audit committee must elect a chair from among themselves and, subject to section 103, may determine the committee's procedure.
(3) In addition to the requirements of section 187 (4) of the Company Act as it applies for the purposes of this Act, the audit committee of a financial institution must review
(a) returns of the financial institution that are to be filed with the superintendent under section 127 (1),
(b) reports that have been made by the auditor under section 123, and
(c) prescribed reports, transactions or matters.
(4) If, under this Act or the Company Act as it applies for the purposes of this Act, a financial statement or return requires the approval of the directors, that approval must not be given until
(a) the audit committee has reviewed and reported on the statement or return, and
(b) the directors have received the report.
(5) On the request of the auditor, of a member of the audit committee or of any director, the chair of the audit committee must convene a meeting of the audit committee to consider any matters the auditor, member or director, as the case may be, believes should be brought to the attention of the directors or members.
116 The auditor of a financial institution must be given notice of, and has the right to appear before and to be heard at, every meeting of the financial institution's
(a) directors, or
(b) conduct review committee
on matters with respect to which the auditor has a duty or function or has made a report; and the auditor must appear at a meeting of the directors or of the conduct review committee when requested to do so by the directors or by the committee, as the case may be.
117 (1) A financial institution must deliver written notice promptly to the superintendent of the appointment, removal or resignation of an auditor and of any other occurrence that causes a vacancy in the office of auditor and, in the case of a removal, of the reasons for the removal.
(2) If the office of auditor is vacant and no application has been made under section 178 (5) of the Company Act as it applies for the purposes of this Act, the superintendent by order delivered to the financial institution, may require the appointment of an auditor by a deadline stipulated in the order; and if an auditor is not appointed by that deadline
(a) the superintendent may appoint an auditor to hold office until the close of the next annual general meeting, and, despite section 184 of the Company Act as it applies for the purposes of this Act, the financial institution must pay to the auditor so appointed remuneration at a rate directed by the superintendent, and
(b) despite section 185 of the Company Act as it applies for the purposes of this Act, without the written permission of the superintendent, the financial institution must not remove an auditor so appointed before the expiration of the auditor's term of office.
118 (1) If the superintendent has reasonable grounds to believe that the auditor of a financial institution
(a) has failed to perform duties,
(b) has failed to comply with this Act,
(c) has been a party to the preparation of or has approved a financial statement that does not fairly present the financial position of the financial institution,
(d) is incompetent, or
(e) has committed professional misconduct,
the superintendent must deliver a written report promptly to the financial institution, and,
(f) if the auditor is a chartered accountant, to the council of the Institute of Chartered Accountants of British Columbia,
(g) if the auditor is a certified general accountant, to the Board of Governors of The Certified General Accountant's Association of British Columbia, and
(h) if the auditor is a person certified by the Auditor Certification Board under section 180 (b) of the Company Act as it applies for the purposes of this Act, to that Board.
(2) The superintendent may require a financial institution or its auditor to provide information the superintendent considers necessary to determine if there are reasonable grounds for a report under subsection (1).
119 (1) An auditor of a financial institution on resigning as auditor must deliver to the financial institution a written statement of the reasons for resignation.
(2) On receiving the statement under subsection (1), the financial institution must deliver a copy of it to the superintendent.
(3) On appointing a new auditor, a financial institution must deliver a copy of any statement made under subsection (1) by the new auditor's predecessor to the new auditor.
120 (1) A financial institution must
(a) ensure that its auditor, or one of them if more than one, is also auditor of any of its subsidiaries, or
(b) deliver to the superintendent a written explanation to the satisfaction of the superintendent of why it is unable to ensure that result.
(2) A trust company or insurance company that is a subsidiary of another corporation must
(a) ensure that its auditor, or one of them if more than one, is also auditor of that other corporation, or
(b) deliver to the superintendent a written explanation to the satisfaction of the superintendent of why it is unable to ensure that result.
121 (1) If facts come to the attention of the officers or directors of a financial institution
(a) that could reasonably have been determined before the date of the last annual general meeting, and
(b) that, if known before the date of the last annual general meeting, would have required a material adjustment to the financial statement presented to the meeting,
the officers or directors must communicate the facts to the auditor who reported to the members under Part 6 of the Company Act as it applies for the purposes of this Act; and the directors must promptly amend the financial statement and deliver it to the auditor and to the superintendent.
(2) Whether through communication described in subsection (1) or by any other means, if facts described in subsection (1) (a) and (b) come to the attention of the auditor and the auditor considers it necessary to amend the report in respect of the financial statement presented to the last annual general meeting, the auditor must
(a) inform the superintendent in writing, and
(b) amend the report so that it complies with Part 6 of the Company Act as it applies for the purposes of this Act.
(3) If the auditor amends the report under subsection (2), the directors must mail to the members a copy of the amended report and a statement explaining the effect of the amendment on the financial position and results of the operations of the financial institution.
122 (1) On the demand of an auditor of a financial institution, a person who is or has been a director, officer, employee or agent of a financial institution or a financial institution's subsidiary or holding company must, to the best of the person's ability to do so,
(a) furnish all information and explanations to the auditor, and
(b) allow the auditor access to and furnish to the auditor copies of records, documents, books, accounts and vouchers of the financial institution and of its subsidiaries, if any, or its holding company, if any,
as the auditor considers necessary for the purpose of any examination or report that the auditor is permitted or required to make under this Act or the Company Act as it applies for the purposes of this Act.
(2) A person who in good faith makes any communication under this section is not liable in a civil action only because of making the communication.
(3) Despite section 218, the superintendent may provide the auditor with information about, or obtained from, the financial institution.
123 (1) The auditor of a financial institution must report in writing promptly to the financial institution's directors whenever, in the ordinary course of the auditor's duties, the auditor
(a) has reasonable grounds to believe that the circumstances of the financial institution have changed, are changing or are likely to change in a way that does or might
(i) materially and adversely affect the viability of the financial institution, or
(ii) otherwise impair the financial institution's ability to carry on or transact business,
(b) becomes aware of an occurrence or transaction or a series of them that does or might reasonably be expected to
(i) materially and adversely affect the viability of the financial institution, or
(ii) otherwise impair the financial institution's ability to carry on or transact business, or
(c) becomes aware that the financial institution or its director or officer has contravened this Act or the regulations under this Act or has contravened the Company Act as it applies for the purposes of this Act.
(2) If the auditor considers that a matter that is the subject of a report under subsection (1) has not been appropriately responded to by the directors within 30 days after receipt by the directors of the report, the auditor must inform the superintendent immediately to that effect in writing, giving full particulars.
124 (1) The superintendent may order the auditor of a financial institution
(a) to report to the superintendent on the adequacy of the accounting procedures used by the financial institution,
(b) to enlarge or extend the scope of an audit,
(c) to examine and report on information prepared by the financial institution,
(d) to supply to the superintendent additional information pertinent to an audit, and
(e) to apply standards specified by the superintendent in addition to generally accepted auditing standards.
(2) In addition to the remuneration set under section 184 of the Company Act as it applies for the purposes of this Act, the financial institution must pay the auditor additional remuneration at a rate directed by the superintendent for the work required under subsection (1) by the superintendent.
(3) The auditor must address to the directors and deliver to the financial institution, a copy of a report under subsection (1) (a) or (c).
125 (1) The superintendent may order a financial institution to appoint an additional auditor to hold office for a term specified by the superintendent.
(2) The financial institution must pay remuneration to an auditor appointed under subsection (1) at a rate specified by the superintendent in the order.
126 An auditor or former auditor of a financial institution who in good faith makes a statement or report under section 123 or 124 is not liable in a civil action because of making the statement or report or because of anything in it.
Division 3 — Books, Records, Returns and Financial Statements of
Financial Institutions
127 (1) Within 90 days after the end of its financial year in each year, a financial institution must file with the superintendent a return in the prescribed form outlining its financial condition and affairs during that financial year and must attach to the return
(a) the comparative financial statement mentioned in section 145 (1) (b) of the Company Act as it applies for the purposes of this Act for that financial year,
(b) if its financial statements for that financial year are in consolidated form, the unconsolidated statements on which the consolidated financial statements are based,
(c) the report of the auditor required under section 188 of the Company Act as it applies for the purposes of this Act,
(d) a copy of a resolution of the directors showing that the return was approved by them, and
(e) if the financial institution is a subsidiary of another corporation, a copy of the annual financial statements for that financial year and auditor's report of the other corporation.
(2) Within 5 days after a financial institution
(a) files with or delivers to the British Columbia Securities Commission or a similar authority outside British Columbia a statement concerning the financial affairs of the financial institution,
(b) distributes such a statement to the members of the financial institution, or
(c) makes an amendment to the financial institution's investment and lending policy established under section 136 (4),
the financial institution must file a copy of the statement or the amendment with the superintendent.
(3) At intervals specified by the superintendent, a financial institution must file with the superintendent a report in the prescribed form outlining the financial affairs of the financial institution.
(4) For the purposes of subsection (3), the superintendent may specify different intervals for trust companies, insurance companies and credit unions.
128 (1) In this section, "subsidiary", in relation to a credit union, has the same meaning, despite section 9 (7), as it has in the Company Act and "holding company", in relation to a credit union, has the corresponding meaning.
(2) A financial institution that is a holding company must include,
(a) in the financial statement to be placed before an annual general meeting, and in each of its comparative interim financial statements, the assets and liabilities, and income and expense, of its subsidiaries, making due provision for minority interests, and indicating in the statement that it is presented in consolidated form, and
(b) in the financial statement to be placed before an annual general meeting,
(i) the names of each corporation that is its subsidiary, and
(ii) if the financial year of any of its subsidiaries does not coincide with the financial year of the financial institution, the date of the financial year end of the subsidiary and the reason why the financial years do not coincide.
(3) It is sufficient compliance with section 172 (1) of the Company Act as it applies for the purposes of this Act if a credit union that otherwise complies with the requirements of that section substitutes for the financial statement referred to in that section a condensed financial statement that conforms to the requirements of subsection (4) of this section.
(4) The condensed financial statement referred to in subsection (3) must contain
(a) a condensed statement of profit and loss for the relevant financial year,
(b) a condensed balance sheet made up to the end of that financial year, and
(c) a notice in conspicuous type that any member or auxiliary member may obtain a free copy of the full financial statement at any branch of the credit union.
(5) A credit union that sends a condensed financial statement to each member and auxiliary member as permitted by subsection (3) must
(a) keep at each of its branches or offices a copy of the full financial statement, and
(b) provide a free copy of the full financial statement to any member or auxiliary member who requests one.
129 A financial institution must prepare its financial statements in accordance with generally accepted accounting principles and with the regulations.
130 (1) A financial institution must keep at each branch or office of the financial institution a copy of its most recent annual financial statement and auditor's report.
(2) Every person may examine free of charge during the usual business hours of the financial institution a copy of a financial statement and auditor's report referred to in subsection (1).
(3) At the request of any person, a financial institution must provide that person with a copy of a financial statement and auditor's report on payment of a reasonable amount, if any, for that service that the directors may specify.
131 (1) The financial year end of a financial institution, incorporated on or after September 15, 1990, is December 31.
(2) If, immediately before September 15, 1990, the financial year end of a financial institution is a date other than December 31, the financial institution may change its financial year end to December 31, but not to another date.
(3) If, in any 12 month period, every credit union acting in concert with every other credit union adopts by special resolution the same date other than December 31 as its financial year end, then despite subsections (1) and (2), the financial year end of every credit union is changed to that date.
132 The superintendent must file with the registrar a copy of
(a) every business authorization,
(b) any conditions attached to a business authorization or any modification of such conditions,
(c) an order under section 249 revoking a business authorization, and
(d) an order of the Supreme Court under section 251 appointing a receiver, a receiver manager or a trustee,
within 10 days after the business authorization is issued, the conditions are attached or modified or the order is made.
133 (1) A financial institution must maintain in British Columbia,
(a) if the financial institution is authorized to carry on deposit business, a record of all depositors, their names and addresses as far as is known and the sums deposited by the depositors,
(b) if the financial institution is authorized to carry on trust business, full and adequate records relating to the trust business of the financial institution,
(c) a record of all loans and investments made by the financial institution, and
(d) if the financial institution is authorized to carry on insurance business,
(i) a record of contracts of insurance in which the financial institution is an insurer, and
(ii) a record of all contracts of reinsurance and reinsurance treaties in which the financial institution is an insured or insurer.
(2) A financial institution must keep the superintendent informed in writing of the location of the records required to be kept by it under subsection (1).
(3) A financial institution must not change the location of the records required to be kept under subsection (1) unless it has delivered 7 days' written notice to the superintendent.
134 (1) A financial institution must deliver to the superintendent 30 days' written notice of a change in location of its head office.
(2) A credit union or trust company must deliver to the superintendent 30 days' written notice of its intention to locate or relocate an office.
(3) Subject to subsections (1) and (2) and to the regulations, a credit union may operate, locate or relocate one or more offices.
Division 4 — Investments and Lending of Financial Institutions
135 The directors of a financial institution must appoint or elect at the directors' first meeting following each annual general meeting, a committee, to be known as the investment and loan committee, composed of not fewer than 3 individuals, of which
(a) at least one member must be an officer,
(b) a majority of the members must not be officers or employees of the financial institution or of an affiliate of the financial institution, and
(c) in the case of a trust company or insurance company, not less than 1/3 of the members must be unaffiliated directors,
to hold office until the next annual general meeting.
136 (1) For the purposes of this section and section 137, "prudent standards" are those that, in the overall context of an investment and loan portfolio, a prudent person would apply to investments and loans made on behalf of another person to whom there is owed a fiduciary duty to make investments without undue risk of loss and with a reasonable expectation of a fair return on the investments.
(2) A financial institution and any subsidiary of the financial institution must adhere to prudent standards in making investment and lending decisions, in giving guarantees and committing itself to other financial obligations, in writing down the value of investments and loans on its books and in managing its investments and loans.
(3) The investment and loan committee of a financial institution
(a) must recommend to the directors of the financial institution for their approval a written investment and lending policy that, for the financial institution and its subsidiaries, if any, the committee considers to be consistent with the prudent standards required under subsection (2), and
(b) as the committee or the directors consider necessary, and at least annually, must review the investment and lending policy and recommend amendments that the committee considers to be necessary or desirable.
(4) If the directors of the financial institution receive a recommendation under subsection (3), the financial institution, consistently with the requirements of subsection (5), must
(a) adopt the recommendation and establish the recommended policy, or the recommended amendments to that policy as part of the investment and lending policy of the financial institution and of its subsidiaries, if any, or
(b) make changes to the proposed policy or to the proposed amended policy that it considers to be necessary or desirable, and establish the policy, with those changes, as the investment and lending policy of the financial institution and of its subsidiaries, if any.
(5) A financial institution must ensure that the investment and lending policy established under subsection (4)
(a) comprehensively deals with the management and diversification of the financial institution's investment and loan portfolio, together with that of any subsidiary of the financial institution,
(b) contains everything reasonably necessary to ensure that it is consistent with prudent standards, and
(c) without limiting the generality of paragraph (a) or (b), includes
(i) the powers and duties of any committees or officers to whom the power to make investments or loans is delegated from the directors and any conditions to which the delegations are subject,
(ii) an upper limit on the amount of money in the aggregate that the financial institution and its subsidiaries may
(A) lend under all loans, and
(B) commit under all guarantees or other financial obligations to any combination of one person and that person's associates,
(iii) an upper percentage limit to be used in determining the amount that the financial institution or its subsidiaries may lend on the security of a mortgage of land to be calculated by subtracting, from the specified percentage of the fair market value of the land at the time the money is lent, the amount of indebtedness under any prior or equally ranking security that encumbers the land, except in cases in which
(A) the loan secured by the mortgage is approved or insured under the National Housing Act (Canada), or
(B) the excess is guaranteed or insured through an agency of the government of Canada or of a province or is insured by a policy of mortgage insurance issued by an insurer authorized to carry on business under this Act, or licensed or registered or otherwise authorized to carry on insurance business under the Insurance Companies Act (Canada) or similar legislation of a province, and
(iv) provisions dealing with prescribed matters.
(6) A financial institution must file with the superintendent a copy of the investment and lending policy established under subsection (4).
137 If
(a) the superintendent believes on reasonable grounds that the investment and lending policy established under section 136 (4) is inconsistent with prudent standards,
(b) the investment and lending policy is not comprehensive, or
(c) the investment and lending policy does not comply with section 136 (5) (c),
the superintendent may order the directors of the financial institution to review immediately the investment and lending policy in accordance with section 136 (4), taking into account the matters specified in the superintendent's order.
138 (1) A financial institution and any subsidiary of the financial institution must not make investments or loans other than ones that,
(a) subject to section 140, are within the limits, if any, prescribed for the purpose of this section,
(b) subject to section 140, are in accordance with the conditions, if any, prescribed for the purposes of this section,
(c) are consistent with the investment and loan policy established under section 136 (4) by the financial institution, and
(d) subject to sections 140 and 141 (2), will not result in the financial institution, or any of its subsidiaries, or any combination of the financial institution and its subsidiaries, acquiring, holding or controlling, whether directly or indirectly,
(i) more than 10% of the voting shares in a corporation, or
(ii) more than a 10% interest in any entity.
(2) On application of a credit union, the superintendent, by written authorization applicable to
(a) one or more particular investments or loans,
(b) one or more classes of investments or loans, or
(c) all investments or loans
of that credit union that are made before the end of June, 1992, may authorize the credit union to make investments or loans in amounts greater than the limits, if any, prescribed for the purpose of this section or on conditions that vary from the conditions, if any, prescribed for the purpose of this section.
(3) In exercising the discretion given under subsection (2), the superintendent must take into account the criteria, if any, prescribed for the purpose of subsection (2).
139 A credit union that is not a central credit union must not
(a) make a loan to or guarantee indebtedness of, or
(b) invest in equity shares issued by
another credit union that is not a central credit union.
140 Section 138 (1) (a), (b) or (d) does not apply in respect of a prescribed type of loan or investment made by a subsidiary of a financial institution in accordance with the regulations.
141 (1) In this section:
"factoring" means the business of buying or selling, outright and without recourse, accounts receivable;
"financial leasing" means a business in which the owner of equipment, machinery or other personal property grants leases of the equipment, machinery or other personal property to others, with the object of receiving in return payments that recoup to the lessor the lessor's entire investment in the equipment, machinery or other personal property;
"venture capital corporation" means a corporation the activities of which are limited to
(a) the provision of financing and loans to entities in circumstances that involve the corporation in the holding of equity and debt security instruments of the entities being financed, and
(b) the provision of financial or management consulting services to entities whose security instruments have been acquired by the corporation that provides the services in a manner described in paragraph (a) or that participates in the provision of those services in contemplation of so acquiring security instruments.
(2) Section 138 (1) (d) does not apply if a financial institution directly or indirectly acquires, holds or controls
(a) more than 10% of the voting shares in a corporation that carries on, or more than a 10% interest in another type of entity that carries on, one or more of the following kinds of business;
(i) banking;
(ii) insurance business;
(iii) trust business, deposit business or both;
(iv) the business of a broker or underwriter of or dealer in securities;
(v) investment counseling;
(vi) portfolio management;
(vii) mutual fund investment;
(viii) data processing;
(ix) financial leasing;
(x) factoring;
(xi) the issue of credit cards and the operation of credit systems connected therewith;
(xii) acquiring, holding, maintaining, improving, selling, leasing or managing land or acting as agent in the sale or purchase of land;
(xiii) prescribed financial business,
(b) more than 10% of the voting shares in a venture capital corporation, or
(c) subject to first receiving the written consent of the superintendent and to any conditions that the superintendent in giving the consent may impose, more than 10% of the voting shares in a corporation that carries on a business that is reasonably ancillary to the business of a financial institution.
(3) Despite subsection (2), a financial institution must not invest, directly or indirectly,
(a) in a corporation described in subsection (2) if the investment would result in the financial institution having a total investment, directly or indirectly, in all such corporations, except those described in subsection (2) (a) (i), (ii) and (iii), that exceeds 5% in the aggregate of the financial institution's assets, or
(b) more than 2% of its assets in corporations described in subsection (2) (a) (xii) and (b).
142 (1) Subject to subsection (2), a financial institution or a subsidiary of a financial institution may acquire assets that it would not otherwise be permitted to acquire under this Division,
(a) subject to first receiving the consent of the superintendent, in payment or part payment for security instruments sold by the financial institution or the subsidiary,
(b) subject to first receiving the consent of the superintendent, under an arrangement in good faith for the reorganization of a corporation whose security instruments were previously owned by the financial institution or the subsidiary,
(c) subject to first receiving consent of the superintendent, on amalgamation with another corporation of a corporation whose security instruments were previously owned by the financial institution or the subsidiary,
(d) for the purpose in good faith of protecting investments of the financial institution or the subsidiary,
(e) in the case of a trust company or an insurance company, on an amalgamation permitted under section 26 or on the company doing any of those things described in section 28, or
(f) by realizing on the security for a loan if the security is shares in a corporation and the effect of realizing on the security is that the financial institution or the subsidiary will hold, directly or indirectly, more than 10% of the voting shares in a corporation not described in section 141 (2).
(2) If a financial institution has acquired assets in accordance with subsection (1), it must dispose of them within 5 years after their acquisition unless the superintendent extends the time by order made before the time expires.
143 The superintendent may order a financial institution to dispose of and realize on, within a period specified by the superintendent, an investment or loan made in contravention of a provision of this Part.
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