CDS Procedures

Procedures and performance standards for processing Government of Canada Retail Debt instruments through The Canadian Depository for Securities Limited (CDS).

Retail Debt Products

Beginning with the 2012 Campaign only Canada Premium Bonds (CPBs) are available for purchase.

The following products are available to be processed by CDS:

The Canada Savings Bond (CSB)
Bond (Compound-Interest ”C” Bond and Regular-Interest ”R” ) that was issued by the Government of Canada are redeemable at any time.  This product is registered as to principal and interest.

The Canada Premium Bond (CPB)
Bond issued by the Government of Canada that is redeemable at any time and sold through authorized Investment Dealers in non-certificated form. If CPBs are redeemed prior to their anniversary date, interest will be paid up to the last annual anniversary date of the bonds in question. Valid hardship conditions apply which interest is paid up to the end of the month prior to the date of redemption.  CPBs are available in Compound-Interest ”C” Bonds and Regular-Interest ”R” Bonds.

Process Descriptions

The following processes are described:

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” Bonds and Regular-Interest ”R” Bonds.

New Issue Processing

• Must be in Multiples of $100.
• Minimum Par Value for ”R” Bonds is $300.

CPBs: On Issue Date (e.g., 1 November), the dealer enters the par value sold for each ISIN into a CDSX trade using CUID BOCE. Trades must be entered by 12 p.m. (noon ET). The dealer must enter all sales made from the first day of the sales period, e.g., 1 October up to the last day of sales (excluding the current day), e.g., 31 October. This process is also repeated on the following day for sales not included in the previous day’s trade (up to the close of business on issue date). The trade will settle when dealer funds/credit is available. Funds must be available before 3 p.m. or the trade may be rejected. Once settled, the dealer must remit funds to CDS through the payment exchange. Sales entered after the deadline must include daily accrued interest charges and must be identified by a comment in the Memo field (i.e., Late Sales).

Interest is calculated as follows:

• Par Value X CSB Interest Rate X No of days (excluding Issue Date) / 365
• Dealer will be asked to identify late purchase trades by a comment in the Memo field i.e. Late Sale
• Accrued interest payment will not be adjusted if it is within $6.99 of the amount owed.

Effective with the 2008/2009 CSB Campaign, only Individual, Joint with Survivor and Self-Directed Registered Plan registration types will be available for purchase.

Bonds may be recorded in the name of one individual in his/her own right, whether adult or minor; or, two or more individuals with right of survivorship.* Bonds may also be recorded in the name of a trust governed by one of the following plans under the Income Tax Act (Canada) or provincial legislation: a Registered Retirement Savings Plan, a Registered Retirement Income Fund, a Registered Education Savings Plan, a Deferred Profit Sharing Plan, an Employee Profit Sharing Plan, a Registered Pension Plan or a Tax Free Savings Account.

*Province of Quebec: The term “with right of survivorship” is not applicable under current law.

Withdrawals for Physical Certificates

• Multiples of $100.
• Minimum Par Value for ”R” Bonds is $300.

Beginning with the November 2008 series, CSBs and CPBs will no longer be eligible for physical withdrawal from CDS. The product Terms and Conditions were updated to reflect this change. All series issued prior to November 2008 will continue to be eligible for withdrawal.

CSBs and CPBs: Withdrawals from CDS are expected to be rare and the service level to issue a certificate is between six and eight weeks. Furthermore, withdrawals for Regular-Interest ”R” Bonds submitted during the closed-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 verify the accuracy of the transaction and process valid withdrawal requests. Certificates will be delivered to the dealer via Canada Post (regular mail) at the address specified in the Memo field of the Security Withdrawal Notice. Note: The dealer must specify a delivery address in order to expedite the delivery of certificates.

• Certificate inscription and distribution occurs on a weekly basis between 1 November and 31 January and biweekly between 1 February and 31 October.

Withdrawals for Transfer to The Canada RSP/RIF

ONLY existing plan owners can contribute to their account in The Canada RSP/RIF.

The dealer enters a withdrawal transaction on CDSX and indicates the following in the Memo field:

• Transfer to The Canada RSP/RIF for existing plan owner
• Identify which supporting documents that will be mailed to the Canada Savings Bonds office i.e., T2033 (for registered holdings), or Letter of Direction (for non-registered holdings), Transfer Form and Guidelines (533)
• Client name

Supporting documentation must be sent to the Canada Savings Bonds office on the same day the withdrawal is requested on CDSX and must reference the CDS Withdrawal Requisition Number.

Once all supporting documents are received, the custodian will verify the accuracy of the transaction and confirm valid withdrawal requests. Holdings for valid requests will be transferred into the client’s existing account in The Canada RSP/RIF.  Note: No physical certificates will be issued.

Redemptions

• Redemptions must be submitted in multiples of $100 for Regular Interest “R” Bonds.
• Redemptions in multiples of $1 are allowed for “C” Bonds in order to support Self Directed holdings transferred from The Canada RSP/RIF Plans.

CSBs and CPBs (interest will be paid up to the last annual anniversary date). 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 7:00 p.m. (ET), the funds for the redemption will be in the dealer’s DCS Funds Account the next business day. If the entry is completed after 7:00 p.m. (ET), 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.

Reversal of Redemptions

CSBs and CPBs: 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 the error occurred. Dealers will be responsible for complying with the three month rule and are responsible for calculating their own Reversal of Redemption interest calculation (see below for calculation and guidelines). Using the reversal of redemption interest calculation plus the redemption value, the dealer will submit a trade through CDSX buying the desired par value of the ISIN back 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. Trades must be received by 12:00 p.m. (noon ET) in order to be settled the same business day.

Reversal of Redemption Interest Calculation = (Redemption Value x applicable CSB/CPB current year interest rate x Number of days since redemption)/365.

Total of Trade should equal = original redemption amount + reversal of redemption interest calculation

The total of the trade can be manual entered under the “Gross Amount” of the CDSX system, please ensure that the par value is also entered in the trade.

Example of Calculations:

CPB 31 “C” par value of $1,000 was redeemed August 12, 2012, mistake was realized August 29, 2012 total days elapsed 17.

Reversal of Redemption Interest calculation = ($1,321.38 x 1.40% x 17)/365 = $0.86

Total trade should total = $1,322.24

CSB 56 “C” par value of $10,000 was redeemed July 13, 2012, mistake was realized September 27, 2012 total days elapsed 76.

Reversal of Redemption Interest calculation = ($13,636.98 x 0.65% x 76)/365 = $18.46

Total trade should total = $13,655.44

CPB 10 “R” par value of $10,000 was redeemed August 16, 2012, mistake was realized September 10, 2012 total days elapsed 25.

Note: That regular CPB interest bonds will be calculated based on their par value due to the nature of the product.

Reversal of Redemption Interest calculation = ($10,000 x 1.80% x 25)/365 = $12.33

Total trade should total = $10,012.33

CSB 82 “R” par value of $5,000 was redeemed June 29, 2012, mistake was realized September 5, 2012 total days elapsed 68.

Reversal of Redemption Interest calculation = ($5,008.12 x 0.65% x 68)/365 = $6.06

Total trade should total = $5,014.18

Guidelines:

• Dealers must include the Redemption Date and Redemption Value in the memo field.
• If the Redemption Date is missing, the trade exceeds the three month rule, the daily accrued interest is not calculated correctly or if the Redemption Value is missing the trade will be rejected.

Hardship Redemptions

• Redemptions must be submitted in multiples of $100 for Regular Interest “R” Bonds.
• Redemptions in multiples of $1 are allowed for “C” Bonds in order to support Self Directed holdings transferred from the Canada RSP/RIF Plans.

CPBs may be redeemed prior to maturity with interest paid up to the end of the month prior to the date of redemption provided one of the following conditions exists and proper supporting evidence is provided to the dealer:

• The owner has died
• The redemption is ordered by a court
• The proceeds of redemption are required by the bond owner to:
  1. avoid bankruptcy;
  2. purchase a home further to the Home Buyers Plan of the Government of Canada; or
  3. 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.
• 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 Canada Savings Bonds office Contact 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 dealer 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.

Account Movements

CSBs and CPBs: When a customer chooses to move his/her 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.

Conversion from Regular to Compound

• Must be in Multiples of $100.

CPBs: 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.

Conversion from Compound to Regular

• Must be in Multiples of $100.
• Minimum Par Value for ”R” Bonds is $300.

CSBs and CPBs: This transaction applies to the movement of all products within the same dealer and can occur until maturity of the bond. No funds are involved when this transaction occurs within the initial thirteen (13) month period from the 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 wish to convert to an ”R” Bond. As in the case for the redemption event, if the entry is completed before 7:00 p.m. (ET), the funds will be in the dealer’s account the next business day. After 7:00 p.m. (ET), the funds will be deposited the second business day.

Annual Interest

CSBs and CPBs: 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.

Product Maturity

CSBs and CPBs: 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.

Certificate Deposits

CSBs and CPBs : Ad hoc certificate deposits are now available. Follow the link for detailed procedures.

Any outstanding CSB or CPB held in certificated form can be deposited into CDS.

Deposit to CDS for Transfers from Canada RSP/RIF Account to Dealer Self-Directed Account

Beginning in 2012, CSB or CPB positions held in The Canada RSP/RIF that are transferred to Self-Directed Plans will be deposited into CDS

• To initiate the transfer, Dealers are to set up a CDSX Deposit notice and send a completed Form T2033 or equivalent along with a copy of the CDSX Deposit Notice – to the Canada Savings Bond office. It is critical that the Dealer includes a contact name and telephone number – transfer requests received without contact information will be rejected.

Mail Address
Canada Savings Bonds
Registered Products
P.O. Box 2390, Station D
Ottawa, ON K1P 1K8

Courier Delivery Address
Canada Savings Bonds
Registered Products
50 O’Connor Street, Suite 201
Ottawa, ON K1P 6L2

Fax Number
613 782-8096

• The T2033 request must also include the par values for each individual bond series being transferred to CDS (either on the form or on an attached piece of paper). Transfer requests received with either missing par values and/or incorrect par values will be rejected.
• The par value held per bond series can be determined by the Dealer by looking at a recent account statement, or by calling 1-888-646-2626 and speaking to a CSR who will provide the values.
• If a Dealer calls the 1-888-646-2626 number to confirm the par values held, they will be reminded that the actual par values should be included on the T2033, but that rounded up par values should be included on the CDSX Deposit Notice. For example, if the par value is $1,254.12, the rounded par value is $1,255.00.
• For holdings in The Canada RIF, the Dealer should always call the 1-888-646-2626 number. The Canada Savings Bond office will investigate and call back to confirm whether the RIF Annual Minimum Payment (AMP) needs to be released prior to transferring to CDS (this will be done before the actual par values are provided to the Dealer).

Dealers are to enter CDSX Deposits using the Bank of Canada BOCF CUID

• Each deposit must be in multiples of $1.00. (for example, if the par value of the holding is $1,234.12 then the deposit amount would be rounded to $1,235.00)
• The memo field must contain the following information:
  1. Transfer from Canada RSP/RIF to CDS
  2. The Dealer’s contact name and telephone number
  3. Client’s name and Canada RSP/RIF plan number
  4. Identify supporting documents that will be mailed or faxed to the Canada Savings Bond office (T2033 with a copy of the Deposit Notice). Note faxes are only accepted if they include a “Signature guaranteed” stamp and a “Certified True Copy”
• Supporting documentation must be sent to the Canada Savings Bonds office on the same day the deposit is requested on CDSX.
• Once the CDSX Deposits and all supporting documents are received, the Canada Saving Bond office will verify the accuracy of the transaction and the Custodian will confirm valid requests. Holdings for valid requests will be transferred from the client’s existing Canada RSP/RIF account to CDS within 10 Business Days of receiving complete documentation.
• Connector series (any CSB or CPB series with a 900-series identifier) cannot be transferred from The Canada RSP/RIF to CDS. Any transfer request containing connector series will be rejected back to the Dealer with instructions to either resubmit the request without the connector series holdings, or to wait until the next November at which point the connector series will have rolled over to the next regular bond series.
• CPS Payroll Bonds (any instrument with a CPS identifier) are not eligible for transfers to CDS, for the reason that a transfer in kind is contrary to the Terms and Conditions of the Canada Payroll Savings Plan. Transfers must be done in cash and the Form T2033 or equivalent must be completed.
• Under the Forms & Materials section of the CDS Procedures webpage, the list of ISINS and their corresponding CSB or CPB Compound series (in PDF format) can be referenced or downloaded.

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 the Bank of Canada 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, form an enforceable agreement between the Bank (acting as the agent of the Government of Canada) and the authorized sales agent (acting as the 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 foregoing, 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. When requested by the Bank the authorized sales agent will provide the Bank, 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 the Bank 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 current Sales Agent Agreement, the Bank 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.