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Procedures and performance standards for processing Government of Canada Retail Debt instruments through The Canadian Depository for Securities Limited (CDS)
Retail Debt Products
The following products are available to be processed by CDS:
| 1. |
The Canada Savings Bond (CSB): Bond issued by the Government of Canada that is redeemable any time and sold through Authorized Sales Agents. Available in Compound Interest C Bond and Regular Interest R Bond. This product is registered as to principal and interest. |
| 2. |
The Canada Premium Bond (CPB): Bond issued by the Government of Canada that is redeemable annually on the Anniversary Date (and during 30 days thereafter) and sold through Authorized Sales Agents. Available in Compound Interest C Bond and Regular Interest R Bond. |
| 3. |
The Canada Investment Bond (CIB): Bond issued by the Government of Canada that carries a fixed-rate term. It is non-redeemable prior to maturity but transferable, available only through Investment Dealers (dealer), IDA members and Authorized Sales Agents and fully non-certificated. Available in Compound Interest C Bond and Regular Interest R Bond. |
Process Descriptions
The following processes are described in this document:
General information:
Each product is identified by a unique ISIN number. Unique ISIN numbers are issued for each product type based on the method of interest payable for each product. For instance, separate ISIN numbers are issued for Compound Interest C Bond and Regular Interest R Bond.
New issue processing:
(CSB, CPB, CIB) On Issue Date (e.g., November 1), the dealer enters the par value sold for each ISIN into a CDSX trade using CUID BOCE. Trades must be entered by 12 pm (noon ET). The dealer must enter all sales made from the first day of the sales period , e.g., October 1 up to the last day of the previous month, e.g., October 31. The trade will settle when dealer funds / credit is available. Funds must be available before 3 pm or the trade may be rejected. Once settled, the dealer must remit funds to CDS through the payment exchange. This process is also repeated on the second day for sales captured on the last day of sales (up to the close of business on Issue Date). These sales are also entered as a par value trade up to 12 pm.
New Issue process map
Withdrawals:
(CSB, CPB) Certificate withdrawals are not available for the CIB. At the initial time of sale of CSBs and CPBs, certificate requests are not to be processed through CDSX. All certificate requests should be made through the normal channel. This can either be through the Retail Debt Management System (RDMS) proprietary system, through a 3rd party supplier or through the dealer's bank. Withdrawals through CDS are to be requested only after a position has been deposited into CDS. These requests are expected to be rare and the service level to issue a certificate will be between 4 to 6 weeks. Furthermore, withdrawals for Regular interest R Bonds submitted during the close loan period (two months prior to the anniversary date) will be rejected and returned to the dealer.
The dealer enters a withdrawal transaction on CDSX. The custodian will process valid withdrawal requests and forward the request to EDS for certificate printing. EDS will verify the accuracy of the transaction, e.g., completeness of registration details and may contact the dealer for further clarification when required. Certificates will be delivered to one of the CDS offices as specified on the withdrawal request.
Withdrawal process map
Redemptions:
CSBs (and CPBs during their redemption window). CIBs may not be redeemed prior to maturity. Dealers will enter the PAR VALUE of the ISIN that their customer wishes to redeem into the redemption tender. If the entry is completed before 7:30 pm, the funds for the redemption will be in the dealer's DCS Funds Account the next business day. If the entry is completed after 7:30 pm, the funds will be in the dealer's DCS Funds Account the second business day.
Daily redemption tender processes — the Bank or its agent will need to release the redeemed security position entered by the dealer the previous business day to the Bank's S/A account. The Bank or its agent will then enter a withdrawal request for the value of the redeemed securities. Lastly, the Bank custodian will confirm the withdrawal request.
Redemption process map
Reversal of redemptions:
(CSB, CPB) Dealers will be able to reverse a redemption due to the wrong product or amount being redeemed. This transaction will be allowed up to three months after the date which the error occurred. Dealers will be responsible to comply with the three month rule. The dealer must contact the EDS Call Centre Helpline 1 888 646-2626 to obtain the redemption factor(s) for the ISIN (s) to be reissued. Please note that the redemption factor provided will always be the next month's factor. Using the redemption factor as the price, the Dealers will submit through CDSX buying the desired par value of the ISIN from the Bank of Canada (using CUID BOCE). Funds due to the Bank will be submitted through the CDSX Payment Exchange. Funds must be available by 3 pm otherwise the trade may be rejected.
Reversal of Redemption process map
Hardship redemptions:
(CPB) A hardship redemption can be considered outside the Redemption period provided one of the following conditions exists and proper supporting evidence is provided to the dealer:
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The owner has died |
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The redemption is ordered by a court |
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The proceeds of redemption are required by the bond owner to:
| a) |
avoid bankruptcy; |
| b) |
purchase a home further to the Home Buyers Plan of the Government of Canada; or |
| c) |
pursue education further to the Lifelong Learning Plan of the Government of Canada, for which bonds must be held in a Registered Plan to be eligible for redemption. |
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The redemption is for regular income payments from a Registered Retirement Income Fund. |
Dealers are responsible for ensuring that hardship redemption requests adhere to the rules outlined above. The dealer will call the EDS Call Centre Helpline 1 888 646-2626 to obtain the redemption factor(s) for the ISIN(s) being redeemed. The factor provided is a monthly factor to the end of the previous month. Using the redemption factor as the price, the Dealers will submit a trade through CDSX selling the desired par value of the CPB to the Bank of Canada (using CUID BOCE). The Bank will confirm the trade upon verifying the factor and the dollar value. Once the trade settles, the position will move to the Bank and will be withdrawn from the system. This trade must be submitted by 12 pm for the settlement to occur on the same day.
Hardship process map
Account movements:
(CSB, CPB, CIB) When a customer chooses to move its holdings / portfolio to another dealer, the receiving dealer (dealer taking in the holdings / portfolio) will initiate this trade in CDSX. The second dealer (holdings / portfolio moving from) will confirm the trade details. Once settled, both dealers will update their own customer accounts. The transaction is done on a par basis for $0 cash value and this transaction should be completed in one business day.
Movement process map
Conversion from regular to compound:
(CSB, CPB, CIB) This transaction applies to the movement of all products within the same dealer and can only occur in the initial ten (10) months after the issue date. There are no funds associated with Regular to Compound transactions. Dealers will submit a conversion tender event for the ISIN they wish to convert. In essence this tender event requires the Bank of Canada or its agent to complete a withdrawal from the R bond position followed by a deposit to the C bond position.
Regular-Compound process map
Conversion from compound to regular:
(CSB, CPB, CIB) This transaction applies to the movement of all products within the same dealer and can only occur until maturity of the bond. No funds are involved when this transaction occurs within the initial thirteen (13) month period from issue date. After thirteen (13) months, the client is owed funds and these will be issued via the CDSX payment exchange. Dealers will submit a conversion tender event for the C bond they with to convert to an R bond. As in the case for the redemption event, if the entry is completed before 7:30 pm, E T, the funds will be in the dealer's account the next business day. After 7:30 pm, the funds will be deposited the second business day.
Compound-Regular process map
Cross product transfers:
(CSB, CPB, CIB) During the initial three months after the issue date, cross product transfers are permitted if the product was erroneously purchased in place of another (CIB, CSB, CPB). Dealers will submit an exchange tender event for the product they wish to exchange. There are no funds associated with cross product transfers. In essence, this transaction requires the Bank or its agent to complete a CDSX deposit and a withdrawal. The majority of this activity will occur on the day after the details have been entered in the event.
Product transfers process map
Annual interest:
(CSB, CPB, CIB) Annual Interest on Regular Interest bonds will be calculated once all regular processing has been completed on the evening prior to payment date. Settlement will occur on the Anniversary date. Should the anniversary date fall on a week-end settlement will occur on the first business date after the anniversary date.
Annual interest process map
Product maturity:
(CSB, CPB, CIB) All maturing products and series will automatically be redeemed on the evening prior to the maturity date. Settlement will occur on the Anniversary date. Should the anniversary date fall on a week-end settlement will occur on the first business date after the anniversary date.
Maturity process map
Certificate deposits:
(CSB, CPB) Ad hoc certificate deposits are now available. Follow the above link for detail procedures.
Certificate deposit process map
Registration Types
Valid registrations will be limited to:
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In the name of one or more individuals in his or their own right, whether adult or minor, and if more than one individual owns the interest, with or without right of survivorship; |
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In the name of the estate of a deceased individual, or in the name of a trustee appointed under a will; |
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As a personal trust; |
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As a sole proprietorship; |
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In the name of a charitable organization or a charitable foundation registered as such under provisions of the Income Tax Act (Canada); |
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In the name of a trust governed by:
| a) |
a Deferred Profit Sharing Plan (DPSP); |
| b) |
an Employee Profit Sharing plan (EPSP); |
| c) |
a Registered Retirement Savings Plan (RRSP); |
| d) |
a Registered Pension Plan (RPP); |
| e) |
a Registered Retirement Income Fund (RRIF); |
| f) |
a Registered Education Savings Plan (RESP). |
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Client Account Agreement
The dealer will ensure that clients who hold NC-CDSX-Bonds are bound by a client account agreement with the Authorized Sales Agent that provides the Authorized Sales Agent with the authority to transact, on behalf of the NC-CDSX-Bond owner, all possible types of transactions involving NC-CDSX-Bonds including giving CDS or the Bank of Canada instructions for such transactions, and receiving payments on behalf of the Bond owner. The Authorized Sales Agent will take all steps necessary to enable Canada Investment & Savings (CI&S;) to prove that any instructions regarding NC-CDSX-Bonds provided on behalf of the NC-CDSX-Bond owner, and which are acted on by the Bank or CI&S;, form an enforceable agreement between the Bank (acting as agent of the Government of Canada) and the Authorized Sales Agent (acting as agent for the NC-CDSX-Bond owner).
Sales Agent Procedures
The Authorized Sales Agent shall distribute a summary of the terms and conditions of NC-CDSX-Bonds to each owner of NC-CDSX-Bonds at the time of purchase or at the time of the CDS Bring-On of certificated Retail Debt Products, as the case may be. The Authorized Sales Agent shall comply with the terms and conditions of the NC-CDSX-Bonds, including without limiting the generality of the forgoing, the terms and conditions relating to the sales periods, registration types, interest payments, restrictions on transfer, redemption etc. The Authorized Sales Agent shall enter into such agreements with owners of NC-CDSX-Bonds, or take such other steps as may be necessary, to ensure that such owners comply with the terms and conditions of NC-CDSX-Bonds.
The Authorized Sales Agent shall maintain a register of individual owners of NC-CDSX-Bonds, which register shall contain such information as may be specified from time to time by the Bank of Canada or CI&S.; When requested by the Bank or CI&S;, the Authorized Sales Agent will provide the Bank of CI&S;, as the case may be, with the information contained in such register.
The Authorized Sales Agent shall hold all funds received from the sale of Retail Debt Products in a designated account established solely for the purpose. These proceeds are deemed to be held in trust for the Receiver General for Canada pending settlement with CI&S; or its designate.
Closed Loan Period
NC-CDSX-Bonds will not be subject to a closed loan period. Retail Debt products held in certificated form are subject to a two month closed loan period.
Compliance
As stated in the August 2003 Sales Agent Agreement, CI&S; or its designate shall have the right to carry out periodic audits of the records of the Authorized Sales Agent in order to verify that the Agent has not contravened the provisions of specific clauses outlined in the Sales Agent Agreement or of any Appendix. As such, CI&S; and the Bank of Canada are working closely with the Investment Dealer Association in finalizing the details of the periodic audits. Authorized Sales Agents who are members of the Investment Dealer Association will be subject to such audits once finalized.
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