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144 (1) In this Part, a "related party" of a financial institution means a person who
(a) is a director or senior officer of the financial institution or of the holding company of the financial institution or is acting in a similar capacity in respect of an unincorporated entity that controls the financial institution,
(b) is a member of a prescribed class of employees of the financial institution or the holding company of the financial institution,
(c) owns directly 10% or more of the non-voting shares in the financial institution, not counting any non-equity shares in the case of a credit union,
(d) owns or controls, directly or indirectly, 10% or more of any class of voting shares in the financial institution,
(e) is a sole practitioner who is an auditor of the financial institution,
(f) is actively engaged in auditing the financial institution and is a partner in a partnership that is an auditor of the financial institution,
(g) is the spouse of an individual who is a related party under paragraph (a), (b), (c), (d) or (j) or under subsection (2),
(h) is a child who is less than 18 years of age of an individual who is a related party under paragraph (a), (b), (c), (d) or (j) or under subsection (2),
(i) is a corporation in which a person who is a related party under paragraph (a), (b), (c), (d) or (j) or under subsection (2) has or controls, directly or indirectly, more than 50% of the votes that are attached to the outstanding voting shares of the corporation and that may be cast in the election of the directors, or
(j) is designated under subsection (3) as a related party,
but does not include,
(k) when used in relation to a credit union, a central credit union or an entity that is designated by regulation, or
(l) when used in relation to a central credit union,
(i) a member of the central credit union,
(ii) a cooperative credit society incorporated under the Cooperative Credit Associations Act (Canada), or
(iii) an entity that is designated by regulation, and a member or shareholder of that entity.
(2) An individual who, having been a related party under subsection (1) (a), (b), (c), (d) or (j) of a financial institution, ceases to be a related party under that subsection nevertheless continues for the purposes of this Part to be a related party of the financial institution for the 12 months commencing on the date the individual ceases to be a related party as defined in subsection (1) (a), (b), (c), (d) or (j).
(3) For the purposes of this Part, the superintendent by order may
(a) designate a person as a related party of a financial institution if in the superintendent's opinion there exists between the person and the financial institution an interest or relationship that might reasonably be expected to affect the exercise of the best judgment of an officer or director of the financial institution with respect to an investment, loan or other transaction, or
(b) designate a person as a related party of the financial institution if in the superintendent's opinion the person is acting in concert with one or more other persons to own or control, directly or indirectly, 10% or more of any class of voting shares in the financial institution.
145 A financial institution or a subsidiary of it may enter into the following transactions with related parties:
(a) pay or confer a salary, fee, stock option, pension, benefit or incentive benefit to a director or senior officer of the financial institution, or to a person who is in the class of employees prescribed for the purpose of section 144 (1) (b) or designated under section 144 (3);
(b) provide to related parties of the financial institution, at not less than fair market value, services or products that the financial institution or the subsidiary also provides in the ordinary course of its business to the public or, in the case of a credit union, to its members;
(c) if the aggregate amount outstanding under all loans to an individual who is a related party of the financial institution will not exceed the prescribed amount, counting the amount of the intended loan, make a loan to an individual who is a related party of the financial institution under paragraph (a) or (b) of the definition of "related party" in section 144;
(d) buy from, or sell to, a related party of the financial institution, for a nominal amount, as defined in the regulations, property or services having a fair market value that does not exceed that nominal amount.
146 (1) Except for a transaction that is described in section 145 or that is the subject of a consent under section 147, a financial institution or a subsidiary of it must not enter into a transaction with a related party of the financial institution unless the transaction, at the time it is entered into, is
(a) a specific transaction, or
(b) in a class of transactions
approved in writing for the purpose of this section by the conduct review committee of the financial institution.
(2) The conduct review committee of a financial institution must not approve a specific transaction or class of transactions for the purpose of this section unless the specific transaction or class of transactions is in the best interests of the financial institution or, if entered into by a subsidiary of it, in the best interests of both the financial institution and the subsidiary.
(3) The conduct review committee must specify in the written approval referred to in subsection (1) the factors considered by it in determining whether the specific transaction or the class of transactions is in the best interests of the financial institution or the financial institution and its subsidiary, as the case may be, and the factors considered must include
(a) the fair market value of the consideration paid by or received by the financial institution or the subsidiary,
(b) the nature of the transaction in relation to the usual business of the financial institution or the subsidiary,
(c) in the case of a transaction involving a loan by the financial institution or the subsidiary, the nature of the security and its value in relation to the principal amount of the loan, and
147 (1) A financial institution or a subsidiary of it may enter into a transaction with a related party of the financial institution if the transaction, at the time it is entered into, is
(a) a specific transaction, or
(b) in a class of transactions
consented to by the superintendent.
(2) The superintendent may give a consent under subsection (1) if satisfied that the specific transaction or that any transaction in the class of transactions, as the case may be,
(a) is not and will not be contrary to the interests of
(i) the financial institution or the subsidiary or both, as the case may be,
(ii) depositors or policy holders of the financial institution,
(iii) any persons for whom the financial institution acts in a fiduciary capacity, or
(b) does not, will not and is not intended to obscure the financial condition of the financial institution, of the subsidiary or of the related party.
148 (1) Except as provided in this section, a financial institution that holds money as a fiduciary must not
(a) invest that money in securities issued by the financial institution or by a related party of it, or
(b) use that money in any transaction with a related party of the financial institution.
(2) A financial institution may act as a fiduciary in one or more trusts or estates in which there are securities issued by the financial institution or a related party of the financial institution if the securities were
(a) acquired by the person for whom the financial institution acts as a fiduciary, or
(b) held in the trust or estate before the financial institution assumed responsibility as a fiduciary.
(3) If a financial institution acts as a fiduciary in one or more trusts or estates in which securities are held that were issued by the financial institution or by a related party of it, the financial institution must not sell or vote the securities or refuse an offer for them without first receiving the written approval of the conduct review committee and that committee must enter the reasons for the sale, vote or refusal in its minutes.
(4) The conduct review committee at least annually must provide a written report to the directors of the financial institution on securities that have been
(a) issued by the financial institution or by a related party of it, and
(b) held in a trust or estate by the financial institution as a fiduciary
during its immediately preceding financial year and the conduct review committee in the report must give the reasons for any approvals given or denied under subsection (3) during that financial year.
(5) Even though subsection (1) would otherwise prohibit it from doing so, a financial institution or a related party of it may
(a) carry out an express or a specific permission or a direction that is
(ii) contained in an instrument creating a fiduciary duty
(A) to purchase or sell securities of the financial institution or of the related party, or
(B) to enter into a transaction with the financial institution or a related party of the financial institution, as the case may be,
(b) if the financial institution or related party does so as a fiduciary, make an investment in a bond, note or other evidence of indebtedness that is issued by the financial institution or by the related party, as the case may be, and for which there is a published market, or
(c) if the financial institution or related party does so as a fiduciary, make an investment or enter into a transaction in which one or more co-fiduciaries of the financial institution or related party can direct and has or have directed that the investment or transaction be made without the agreement of the financial institution or related party.
149 (1) Where, in respect of any proposed transaction of the financial institution or its subsidiary, a financial institution has reason to believe that the other party to the transaction is a related party of the financial institution, the financial institution must take all reasonable steps to obtain from the other party full disclosure, in writing, of an interest or relationship, direct or indirect, that would make the other party a related party of the financial institution.
(2) A financial institution and a director, officer, employee or agent of the financial institution may, if acting reasonably, rely on the information contained in a disclosure received by the financial institution in accordance with subsection (1) or information otherwise acquired in respect of a matter that might be the subject of the disclosure and no action or proceeding lies against the financial institution or a director, officer, employee or agent for anything done or omitted in good faith in reliance on the information, including without limitation, an action or proceeding under section 150 or 151.
(3) The disclosure referred to in subsection (1) of this section must not be relied on under subsection (2) of this section unless it is evidenced in a consent resolution, the minutes of a meeting or another record deposited in the financial institution's records office.
(a) a financial institution or its subsidiary, director, senior officer or employee fails to comply with this Part, or
(b) a transaction that is prohibited under this Part takes place,
the financial institution or superintendent may apply to the Supreme Court for an order setting aside the transaction.
(2) On application under subsection (1), the Supreme Court may make any order it thinks fit, including, instead of or in addition to an order setting aside the transaction,
(i) account for a profit or gain realized in the transaction,
(ii) pay to the financial institution or a subsidiary of a financial institution any damages suffered by the financial institution or the subsidiary in the transaction, or
(iii) pay to the financial institution or the subsidiary any amount
(A) paid by the financial institution or the subsidiary,
(B) lent by the financial institution or the subsidiary, or
(C) expended by the financial institution or the subsidiary in the transaction,
(b) an order for compensation for loss or damage suffered, and
(c) an order awarding punitive or exemplary damages against any person.
(3) A person is not liable in a proceeding under this section unless the person knew or reasonably ought to have known that the transaction was made in contravention of this Part.
151 (1) If an action is brought under section 232 of the Business Corporations Act or section 84.4 of the Credit Union Incorporation Act in relation to a transaction that is prohibited under this Part, the powers of the Supreme Court include the power to make an order that a person who authorizes, acquiesces in, participates in or facilitates the transaction pay to the financial institution or a subsidiary of a financial institution any
(a) damages suffered by the financial institution or the subsidiary,
(b) amount paid by the financial institution or the subsidiary in the transaction,
(c) amount lent by the financial institution or the subsidiary, or
(d) amount expended by the financial institution in the transaction.
(2) If a transaction that is prohibited under this Part is made or entered into, the right to bring an action conferred on a complainant by section 232 (2) (a) and (b) of the Business Corporations Act or section 84.4 (2) (a) and (b) of the Credit Union Incorporation Act is deemed also to be conferred on the superintendent.
152 (1) A person who authorizes, acquiesces in, participates in or facilitates a transaction that is prohibited under this Part is liable in an action brought under section 232 of the Business Corporations Act or section 84.4 of the Credit Union Incorporation Act, jointly and severally with every other person who authorizes, acquiesces in, participates in or facilitates the prohibited transaction.
(2) A person is not liable in an action brought under section 232 of the Business Corporations Act or section 84.4 of the Credit Union Incorporation Act unless the person knew or reasonably ought to have known that the transaction was made in contravention of this Part.
153 If a question arises in civil proceedings as to whether a financial institution, a subsidiary of a financial institution or a related party of a financial institution has, in acting under this Part, acted in compliance with the requirements of this Part, the burden of proof that it acted in compliance with the Part is on the financial institution, the subsidiary or the related party, as the case may be.
154 If an auditor of a financial institution has made a report to the directors of a financial institution under section 123 (1) (c), and the report discloses a breach of a provision of this Part, the auditor must also immediately report the matter in writing to the superintendent.
Contents | Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 | Part 10 and 11
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