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Bill C-8

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DIVISION 9

INVESTMENTS

Interpretation

Definitions

966. (1) The definitions in subsection 490(1) apply in respect of insurance holding companies, subject to the following:

    (a) the reference to ``section 495'' in the definition ``permitted entity'' is to be read as a reference to ``section 971''; and

    (b) the reference to ``company'' in the definition ``permitted entity'' is to be read as a reference to ``insurance holding company''.

Members of an insurance holding company's group

(2) For the purpose of this Division, a member of an insurance holding company's group is any of the following:

    (a) an entity referred to in any of paragraphs 971(1)(a) to (f) that controls the insurance holding company;

    (b) a subsidiary of the insurance holding company or of an entity referred to in any of paragraphs 971(1)(a) to (f) that controls the insurance holding company;

    (c) an entity in which the insurance holding company, or an entity referred to in any of paragraphs 971(1)(a) to (f) that controls the insurance holding company, has a substantial investment; or

    (d) a prescribed entity in relation to the insurance holding company.

Non-applicati on of Division

(3) This Division does not apply in respect of

    (a) the holding of a security interest in real property, unless the security interest is prescribed under paragraph 984(a) to be an interest in real property; or

    (b) the holding of a security interest in securities of an entity.

Investments

Investments

967. Subject to this Division, an insurance holding company may invest its funds in the shares of or ownership interests in any entity or make any other investment that its directors consider necessary or advisable to manage the insurance holding company's liquidity.

General Constraints on Investments

Investment standards

968. The directors of an insurance holding company shall establish and the insurance holding company shall adhere to investment and lending policies, standards and procedures that a reasonable and prudent person would apply to avoid undue risk of loss and obtain a reasonable return.

Restriction on control and substantial investments

969. (1) Subject to subsections (2) and (3), no insurance holding company shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.

Exception: indirect investments

(2) An insurance holding company may acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of

    (a) an acquisition of control of an entity referred to in any of paragraphs 971(1)(a) to (j), a specialized financing entity or a prescribed entity that controls or has a substantial investment in the entity; or

    (b) an acquisition of shares or ownership interests in the entity by

      (i) an entity referred to in any of paragraphs 971(1)(a) to (j), a specialized financing entity or a prescribed entity that is controlled by the insurance holding company, or

      (ii) an entity controlled by an entity referred to in any of paragraphs 971(1)(a) to (j), a specialized financing entity or a prescribed entity that is controlled by the insurance holding company.

Exception: temporary investments, realizations and loan workouts

(3) An insurance holding company may acquire control of, or acquire or increase a substantial investment in, an entity by way of

    (a) a temporary investment permitted by section 974;

    (b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 975; or

    (c) a realization of security permitted by section 976.

Exception: uncontrolled event

(4) An insurance holding company is deemed not to contravene subsection (1) if the insurance holding company acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the insurance holding company.

Regulations re limits

970. The Governor in Council may make regulations

    (a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Division;

    (b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by an insurance holding company and its prescribed subsidiaries to or in a person and any persons connected with that person;

    (c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and

    (d) prescribing terms and conditions under which an insurance holding company may acquire control of, or acquire or increase a substantial investment in, a specialized financing entity.

Subsidiaries and Equity Investments

Permitted investments

971. (1) Subject to subsections (4) to (6), an insurance holding company may acquire control of, or acquire or increase a substantial investment in,

    (a) a company or a society;

    (b) an insurance holding company;

    (c) a bank;

    (d) a bank holding company;

    (e) a body corporate to which the Trust and Loan Companies Act applies;

    (f) an association to which the Cooperative Credit Associations Act applies;

    (g) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;

    (h) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;

    (i) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or

    (j) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.

Permitted investments

(2) Subject to subsections (3) to (6), an insurance holding company may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (j), whose business is limited to one or more of the following:

    (a) engaging in any financial service activity or in any other activity that a life company is permitted to engage in under subsection 440(2) or section 441 or 442, other than paragraph 441(1)(h);

    (b) acquiring or holding shares of, or ownership interests in, entities in which an insurance holding company is permitted under this Division to hold or acquire;

    (c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the insurance holding company or any member of the insurance holding company's group:

      (i) the insurance holding company,

      (ii) any member of the insurance holding company's group,

      (iii) any entity that is primarily engaged in the business of providing financial services,

      (iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or

      (v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;

    (d) engaging in any activity that a life company is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to

      (i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any member of the insurance holding company's group, or

      (ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;

    (e) engaging in the activities referred to in the definition ``mutual fund entity'' or ``mutual fund distribution entity'' as defined in subsection 490(1); and

    (f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.

Restriction

(3) An insurance holding company may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include

    (a) activities that a company is not permitted to engage in under any of sections 466, 469 and 475;

    (b) dealing in securities, except as may be permitted under paragraph (2)(e) or as may be permitted to a company under paragraph 440(2)(b);

    (c) activities that a company is not permitted to engage in under any regulation made under section 489 if the entity engages in the activities of a finance entity or of any other entity as may be prescribed;

    (d) acquiring control of or acquiring or holding a substantial investment in another entity unless

      (i) in the case of an entity that is controlled by the insurance holding company, a company would be permitted under Part IX to acquire a substantial investment in the other entity, or

      (ii) in the case of an entity that is not controlled by the insurance holding company, a company would be permitted to acquire a substantial investment in the other entity under subsection 493(2), paragraph 493(3)(b) or (c) or subsection 493(4) or 495(1) or (2); or

    (e) any prescribed activity.

Control

(4) Subject to subsection (8) and the regulations, an insurance holding company may not acquire control of, or acquire or increase a substantial investment in,

    (a) an entity referred to in any of paragraphs (1)(a) to (j), unless

      (i) the insurance holding company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

      (ii) the insurance holding company is permitted by regulations made under paragraph 977(a) to acquire or increase the substantial investment;

    (b) an entity whose business includes one or more of the activities referred to in paragraph (2)(a) and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a finance entity, a factoring entity and a financial leasing entity, unless

      (i) the insurance holding company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

      (ii) the insurance holding company is permitted by regulations made under paragraph 977(a) to acquire or increase the substantial investment; or

    (c) an entity whose business includes an activity referred to in paragraph (2)(b), including a specialized financing entity, unless

      (i) the insurance holding company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity,

      (ii) the insurance holding company is permitted by regulations made under paragraph 977(a) to acquire or increase the substantial investment, or

      (iii) subject to prescribed terms and conditions, if any are prescribed, the activities of the entity do not include the acquisition or holding of control of, or the acquisition or holding of shares or other ownership interests in, an entity referred to in paragraph (a) or (b) or an entity that is not a permitted entity.

Minister's approval

(5) Subject to the regulations, an insurance holding company may not, without the prior written approval of the Minister,

    (a) acquire control of an entity referred to in paragraphs (1)(g) to (i) from a person who is not a member of the insurance holding company's group;

    (b) acquire control of an entity referred to in paragraph (1)(j) or (4)(b), other than an entity whose activities are limited to the activities of one or more of the following entities, if the control is acquired from an entity referred to in any of paragraphs (1)(a) to (f) that is not a member of the insurance holding company's group:

      (i) a factoring entity, or

      (ii) a financial leasing entity;

    (c) acquire control of, or acquire or increase a substantial investment in, an entity whose business includes one or more of the activities referred to in paragraph (2)(d);

    (d) acquire control of, or acquire or increase a substantial investment in, an entity that engages in an activity described in paragraph 441(1)(d) or (d.1); or

    (e) acquire control of, or acquire or increase a substantial investment in, an entity engaging in an activity prescribed for the purposes of paragraph (2)(f).

Superintenden t's approval

(6) Subject to subsection (7) and the regulations, an insurance holding company may not acquire control of, or acquire or increase a substantial investment in, an entity referred to in any of paragraphs (1)(g) to (j) and (4)(b) and (c) unless the insurance holding company obtains the approval of the Superintendent.

Exception

(7) Subsection (6) does not apply in respect of a particular transaction if

    (a) the insurance holding company is acquiring control of an entity whose business includes an activity referred to in paragraph (2)(b), other than a specialized financing entity;

    (b) the insurance holding company is acquiring control of an entity whose activities are limited to the activities of a factoring entity or a financial leasing entity; or

    (c) the Minister has approved the transaction under subsection (5) or is deemed to have approved it under subsection 972(1).

Control not required

(8) An insurance holding company need not control an entity referred to in paragraph (1)(j), or an entity that is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province, if the laws or customary business practices of the country under the laws of which the entity was incorporated or formed do not permit the insurance holding company to control the entity.

Prohibition on giving up control in fact

(9) An insurance holding company that, under subsection (4), controls an entity may not, without the prior written approval of the Minister, give up control, within the meaning of paragraph 3(1)(d), of the entity while it continues to control the entity.