This consolidation is unofficial and is for reference only.

For the official version of the regulations, consult the original documents on file with the Office of the Registrar of Regulations , or refer to the Royal Gazette

Part II .

Regulations are amended frequently.

Please check the list of Regulations by Act to see if there are any recent amendments to these regulations filed with our office that are not yet included in this consolidation.

Although every effort has been made to ensure the accuracy of this electronic version, the Office of the Registrar of Regulations assumes no responsibility for any discrepancies that may have resulted from reformatting.

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, Province of Nova Scotia , all rights reserved. It is for your personal use and may not be copied for the purposes of resale in this or any other form.

Trust and Loan Companies Regulations

made under

Section 276 of the

Trust and Loan Companies Act

S.N.S. 1991, c. 7

O.I.C. 92-62 (effective January 21, 1992), N.S. Reg. 18/1992

as amended by O.I.C. 2008-483 (effective September 16, 2008), N.S. Reg. 390/2008

Table of Contents

Please note: this table of contents is provided for convenience of reference and does not form part of the regulations.

Click here to go to the text of the regulations .

Part I - Incorporation and Licensing

Part II - Fees

Part III - Disclosure to Borrowers in Lending Transactions

Disclosure requirements for loans

Disclosure respecting credit

General requirement

Part IV - Public File of Licensed Companies

Part V - Custody and Safekeeping of Securities, Property and Trust Assets

Custody

Safekeeping

Part VI - Financial Statements

Statement of income

Statement of retained earnings

Statement of changes in financial position

Balance sheet

Notes to the financial statements

Part VII - Capital Base

Part VIII - Retained Earnings and Deficits in the Definition of Capital Base

Investments in subsidiaries

Swaps, futures and similar instruments

Short selling and uncovered options

Financial instruments generally

Asset-backed securities

Profit recognition on asset sales

Real estate project accounting

Recognition of fee income

Troubled loan refinancing or restructuring

Favourable rate financing

Provision for losses

Part IX - Capital Base Requirements

Part X - Total Assets

Part XI - Self Dealing

Part XII - Classes of Assets

Part XIII - Liquidity

Part XIV - Subordinated Notes

Part XV - Common Trust Funds

Units of participation

Management and ownership of assets in a fund

Admissions and withdrawals of participations

Participation register

Participation certificates

Distributions of income

Investments

Accounting records and register of participants

Audit report and financial statements

Administration fees and expenses

Publicity

Part XVI - Deposit Agents

Part XVII - Loans to Employees

Part XVIII - Subsidiaries

Part XIX

Duties of an investment committee

Part XX - Networking

Part XXI

Schedule 1 - Fees

Form 1 - Application for the Issue of Letters Patent to Incorporate a Trust or Loan Company

Form 2 - Application for Licence, Change of Licence, Amendment of Terms, Conditions and Restrictions of Licence and the Issue of Supplementary Letters Patent

Form 3 - Power of Attorney for a Chief Agent

Form 4 - Personal Questionnaire for Major Shareholders, Directors and Officers

Form 5 - Liquidity Return

Part I - Incorporation and Licensing

1 An application for the issue of letters patent to incorporate a trust company or loan

company shall be in Form I.

2 An application shall be in Form 2 for

(

a) the issue of supplementary letters patent;

(

b) initial registration as a loan company or as a trust company;

(

c) a change in registration from a loan company to a trust company and from a

trust company to a loan company; and

(

d) an amendment of the terms, conditions and restrictions imposed on

registration.

3 A power of attorney under subsection (9) of

Section 212 of the Act shall be in Form 3.

4 A personal questionnaire for major shareholders under these regulations shall be in Form

Part II - Fees

[repealed]

Part III - Disclosure to Borrowers in Lending Transactions

(1) In this Part

(a) “annual percentage rate” means, in relation to interest payable on a loan or

credit, the interest expressed as a rate per annum;

(b) “cost of borrowing” means, in relation to a loan or credit,

(

i) the interest on the loan or credit,

(ii) administration costs, including any service, transaction or activity

charge,

(iii) loan fees, finders fees, brokerage fees, renewal fees for a renewed loan,

application fees, placement fees, closing costs, discharge fees and

similar charges, and

(iv) any other charges in connection with the loan or credit that are payable

by the borrower to the licensed company or to a person from whom the

licensed company receives a benefit, directly or indirectly, but excludes

any amount that the licensed company is required to pay to persons that

are not restricted parties;

(c) “credit” means an arrangement for obtaining loans and includes a line of

credit and credit made available to a person through the use of a payment,

credit or charge card issued by a licensed company;

(d) “loan” means any money lent, whether secured or unsecured, and includes an

advance, a lease, a loan to a lessee or conditional purchaser and a mortgage;

(e) “prepayment” means, in relation to a loan, a payment other than a payment

made on a date or according to a mechanism that is specified in the loan

contract and includes a payment that is a prepayment as defined by the loan

contract;

(f) “principal amount” means, in relation to a loan, the amount of money lent that

remains unpaid on a given day.

(2) For the purposes of this Part, a renewal of a loan, whether or not it is made

pursuant to an option in the original loan, is deemed to be a separate loan.

7 This Part does not apply in respect of loans made or credit made available by a licensed

company

(

a) to a body corporate, partnership, limited partnership or joint venture; or

(

b) in an amount that exceeds two hundred fifty thousand dollars ($250,000.00),

unless the loan or credit is secured or guaranteed, in whole or in part, by a principal or

secondary residence of an individual.

Disclosure requirements for loans

(1) A licensed company that proposes to make a loan or enters into a loan commitment

subsection (1) of

Section 10 on a disclosure statement.

(2) In the case of a mortgage loan a licensed company shall give a borrower a

disclosure statement under subsection (1) not less than two business days before the

borrower is required to accept the offer respecting the proposed loan provided that

the borrower may waive the time period.

(3) If, at or after the time a licensed company gives a borrower a disclosure statement

under subsection (1), the licensed company gives the borrower another document

proposed loan.

9 At the time a loan contract is entered into, a licensed company shall disclose to the

(

a) as part of the written loan contract between the licensed company and the

borrower;

(

b) in a promissory note to be signed by the borrower; or

(

c) in a separate statement that is attached to the loan contract.

(1) Every licensed company shall disclose under subsection (1) of

Section 8 or

Section

9 to a borrower

(

a) the gross amount of the loan;

(

b) the net amount of the loan to be advanced;

(

c) the amount of prepaid interest, if any, that the licensed company may deduct

from the principal amount;

(

d) the term of the loan;

(

e) the interest on the loan as of the date the loan is made, expressed as an annual

percentage rate, and the method of calculating the rate;

(

f) if the annual percentage rate of interest of the loan is not fixed, the manner of

determining the annual percentage rate;

(

g) the components of the cost of borrowing other than the interest on the loan,

itemized and expressed in dollars and cents;

(

h) a description and itemized estimate of costs to be paid in respect of the loan to

persons other than the licensed company, including, where applicable, legal

fees, registration fees and mortgage insurance fees;

(

i) the method of applying each payment in respect of the loan to the

accumulated cost of borrowing and to the principal amount;

(

j) whether and in what circumstances prepayments are permitted;

(

k) if prepayments are permitted under the terms of the loan or otherwise, the

condition for making any prepayment, the costs and penalties, if any, imposed

as a result of a prepayment and the method of applying a prepayment to the

accumulated cost of borrowing and to the principal amount;

(

l) if prepayments are permitted under the terms of the loan and the borrower

makes prepayment, the method of calculating a rebate on the cost of

borrowing; and

(

m) particulars of any charge or penalty payable by the borrower upon a failure to

make payments under the loan as they come due.

(2) The annual percentage rate of interest on a loan that is disclosed to a borrower shall

be accurate to within one-eighth of one percent.

(3) A licensed company that makes an offer to renew a loan shall disclose to the

borrower, not less than twenty days before the loan matures,

(

a) the amount of any renewal fee, placement fee, bonus or similar charge to be

imposed upon renewal of the loan; and

renewed loan.

(4) A licensed company shall disclose to a borrower under a loan contract, not less than

forty-five days and not more than sixty days before the loan matures, particulars of

any fee, bonus, penalty or similar charge payable to the licensed company upon the

discharge of the loan, setting out the terms of the loan contract that entitle the

licensed company to the fee, bonus, penalty or similar charge.

(1) If the annual percentage rate of interest on a loan is variable, the licensed company

shall give the borrower notice of any change in the annual percentage rate being

charged during the term of the loan within one month after the change occurs.

(2) Subsection (1) does not apply if the change in the annual percentage rate of interest

on the loan is made by reference to a corresponding change in a rate that is readily

ascertainable by a reasonable borrower.

12 A licensed company that acquires a loan contract from a third party shall forthwith

disclose to the borrower any fee, bonus, penalty or similar charge that is or may be

payable by the borrower during the term or upon discharge of the loan.

Disclosure respecting credit

(1) A licensed company that makes credit available to a person shall disclose to the

(2) A licensed company shall disclose to a person at the time it makes credit available

(

a) as part of a written contract or proposed contract between the licensed

company and the person; or

(

b) in a separate statement that is attached to the written contract or proposed

contract.

14 Every licensed company shall disclose under subsection (1) of

Section 13

(

a) the maximum aggregate amount of credit available at one time to the person

under the credit;

(

b) the annual percentage rate of interest, and the method of calculating the rate;

(

c) if the annual percentage rate of interest is not fixed, the manner of

determining the annual percentage rate;

(

d) the components of the cost of borrowing, other than interest, itemized and

expressed in dollars and cents;

(

e) the term of each period for which a statement of account is furnished in

respect of the credit;

(

f) the minimum payment, or the method of calculating the minimum payment,

required for each period;

(

g) the manner, if any, in which the person may discharge the person’s

obligations in respect of the credit without incurring any fee, bonus, penalty or

similar charge;

(

h) the maximum liability of the person for the unauthorized use of any card that

is issued to the person in connection with the credit, in the event that the card

is lost or stolen; and

(

i) particulars of any charge or penalty payable by the person upon a failure to

make payments in respect of the credit as they come due.

15 A licensed company shall give a person to whom credit is made available notice of any

change in an item disclosed pursuant to

Section 14, at least thirty days before the change

becomes effective.

(1) Despite

Section 15, if the annual percentage rate of interest on the credit is variable,

the licensed company shall give the person notice of any change in the annual

percentage rate being charged for the credit within one month after the change

occurs.

(2) Subsection (1) does not apply if the change in the annual percentage rate of interest

on the credit is made by reference to a corresponding change in a rate that is readily

ascertainable by a reasonable borrower.

General requirement

17 If a licensed company is unable, using reasonable efforts, to ascertain the amount of any

component of the cost of borrowing, the licensed company shall disclose in its place an

estimated amount, clearly identified as such, based on the best available information.

18 No licensed company may provide additional information with respect to a lending

transaction that tends to contradict or obscure the information that it is required under this

Part to disclose.

19 Any disclosure or notice that is required under this

Part is sufficiently made or given if it

is in writing and given to the person required to be notified or if it is sent by ordinary first

class mail to the person’s latest address in the records of the licensed company making the

disclosure.

Part IV - Public File of Licensed Companies

20 For the purpose of subsection (1) of

Section 70 of the Act, the following information is

prescribed to be contained in the Superintendent’s file on each licensed company:

(

a) particulars of the company’s charter or letters patent, supplementary letters

patent and all other supporting documents;

(

b) particulars of any orders in council issued with respect to the company;

(

c) particulars of any orders issued under the Act with respect to the company,

unless the order provides otherwise;

(

d) particulars of any consents issued under the Act with respect to the company

and with respect to its holding bodies corporate under

Section 90 of the Act;

(

e) particulars of any amalgamation agreements and agreements that provide for

the purchase or sale of substantially all assets of or to the company, as the case

may be;

(

f) particulars respecting the continuation of registration in a jurisdiction other

than the jurisdiction of incorporation;

(

g) particulars respecting the licence of the company including the details of any

notations made by the Superintendent;

(

h) particulars of any powers of attorney and all undertakings of the company

required under the Act or regulations;

(

i) particulars of any court orders or certificates of conviction issued against the

company as a result of proceedings commenced under the Act or regulations;

(

j) particulars of the surrender of charter, winding up and other dissolution

documents;

(

k) information concerning whether the company’s deposits are insured by a

public agency approved by the Superintendent;

(

l) a list of current officers and directors of the company according to the records

filed with the Superintendent.

Part V - Custody and Safekeeping of Securities, Property and Trust Assets

(1) This Part applies to securities, property and other assets held by a licensed

provincial company as trust assets under administration, as collateral for a loan or as

an acquisition for its own account.

(2) Despite subsection (1), if a licensed provincial company enters into a securities

lending arrangement with a financial institution or securities dealer, this Part applies

in respect of any securities received by the licensed provincial company as a result

of the arrangement but does not apply in respect of any securities lent by the

licensed provincial company under the arrangement.

Custody

(1) Documents evidencing ownership of securities, property or other assets that are held

by a licensed provincial company shall be placed in the possession of a company, a

bank or the Bank of Canada.

(2) Despite subsection (1), documents evidencing ownership of assets not retained in

Canada that are acquired by a licensed provincial company for its own account may

be placed in the possession of an institution in a jurisdiction outside Canada that is

(

a) recognized by the laws of the jurisdiction as a bank or an equivalent to a bank;

and

(

b) empowered by the laws of the jurisdiction to act as a custodian,

and that is regulated by a system similar to that of Nova Scotia.

(3) Subsection (1) does not apply if a court order or an instrument that creates a

fiduciary duty contains a direction respecting securities, property or trust assets that

is inconsistent with subsection (1).

(4) There shall be an agreement in writing between a licensed provincial company and

a custodian mentioned in subsection (1), (2) or (3) governing the custody of

securities, property and other assets that sets out the obligations of the custodian and

the cost, if any, of the services to be provided to the licensed provincial company.

(5) In this Section, “assets not retained in Canada” means

(

a) bonds, debentures and other forms of indebtedness of a body corporate that is

incorporated outside Canada;

(

b) shares of a body corporate that is incorporated outside Canada, unless the

shares are listed on a Canadian stock exchange;

(

c) real estate located outside Canada;

(

d) loans that are secured by real estate or leaseholds outside Canada; and

(

e) mutual fund shares or units that are traded only by dealers who are not

registered with a securities commission in Canada.

(1) The existence of, and ownership rights of a person in, a security or government debt

instrument may be established by the delivery to a licensed provincial company of

(

a) a certificate respecting the issuance and registration of the security or

government debt instrument; or

(

b) a statement of account for the security or government debt instrument given

by a recognized securities depository in Canada that is authorized by law to

operate a book-based system or a comparable institution in a foreign

jurisdiction that is authorized by law to operate a transnational book-based

system.

(2) In this Section, “book-based system” means a system for the central handling of

securities within which all securities in a class or series of any issuer that are

deposited into the system are treated as fungible and may be transferred or pledged

by bookkeeping entry without the actual delivery of the securities.

Safekeeping

(1) Trust assets shall be registered and held by a licensed provincial company or its

nominee in trust for the beneficial owner or in the name of the beneficial owner.

(2) Subsection (1) does not apply where a court order or an instrument that creates a

fiduciary duty contains a direction respecting securities, property or other assets that

is inconsistent with the requirements of that subsection.

25 A licensed provincial company holding securities or property as collateral for a loan shall

obtain from the borrower an assignment of the borrower’s rights in the securities or

property and shall obtain

(

a) in the case of securities, a power of attorney and proof of the assignability of

the securities; and

(

b) in the case of property, proof of the ownership rights of the borrower.

26 A licensed provincial company holding securities or government debt instruments for its

own account shall, within fifteen days after settlement, forward the securities for

registration in the name of the licensed provincial company or its nominee.

(1) Canadian money market instruments that are purchased by a licensed provincial

company for its own account or held by it as trust assets may be held in bearer form

or in registered form accompanied by a power of attorney appointing the licensed

provincial company.

(2) Securities and government debt instruments other than Canadian money market

instruments that the licensed provincial company intends to dispose of within ninety

days after acquisition may be held by the licensed provincial company in bearer

form or in registered form accompanied by a power of attorney appointing the

licensed provincial company.

(3) Section 24, 25 or 26, as the case may be, applies to a licensed provincial company

that does not dispose of securities or government debt instruments described in

subsection (2) within ninety days after acquisition.

(4) Despite

Section 26, if a licensed provincial company acquires securities or

government debt instruments

(

a) that are issued in bearer form only, the licensed provincial company may hold

the securities or government debt instruments in bearer form; and

(

b) that are Canadian money market instruments in street form, the licensed

provincial company may hold the securities or government debt instruments

in street form.

(5) In this Section, “money market instrument” means a publicly-traded debt

instrument issued by a body corporate or a government, maturing within three years

after its date of issue, that is

(

a) purchased by a licensed provincial company for its own account or as a trust

asset; or

(

b) held by a licensed provincial company as collateral for a loan payable within

up to one year from the day the loan was made.

28 A licensed provincial company must take reasonable and prudent action to ensure that

ownership rights of, or security interests in securities, property and other assets that are

registered in the name of the licensed provincial company or its nominee, or held by the

licensed provincial company, are protected under provincial law.

29 Every licensed provincial company that intends to register securities, property or other

assets in the name of a nominee shall notify the Superintendent of the name of its

nominee before making the first such registration.

Part VI - Financial Statements

(1) The financial statements required in respect of a company are the financial

statements set out in

Section 139 of the Act.

(2) For the purpose of subsection (1), the financial statements must be audited and

comply with the requirements for preparation and disclosure set out in this Part.

(1) The degree of disclosure required in the non-consolidated financial statements of a

company to be placed before an annual meeting of shareholders is as set out in this

Part.

(2) The degree of disclosure required for financial statements to be placed before an

annual meeting of shareholders that are prepared on a consolidated basis is as set

out in this Part, allowing for appropriate consolidation adjustments.

(1) Despite any other provision in this Part, a company is not required to disclose in its

financial statements a matter that, in all the circumstances of the company, is

immaterial.

(2) A determination as to whether a matter is immaterial must take into consideration

the effect of the authorized borrowing multiple of the capital base of the company.

Statement of income

(1) Every statement of income must set out separately at least

(

a) revenue from mortgages, showing separately

(

i) interest earned on mortgages, and

(ii) other mortgage revenue, if any, including amortized fee income;

(

b) earnings from investments in subsidiaries;

(

c) earnings from investments in securities dealers, where the relationship of the

securities dealer to the company is that of a subsidiary or a body corporate

under significant influence;

(

d) revenue, excluding gains or losses on sales, from investments in securities

other than those set out in clauses (

b) and (c);

(

e) revenue from loans to individuals, including investments made under clause

44(1)(

g) of the Act;

(

f) revenue from loans to persons other than individuals including investments

made under clause 44(1)(

g) of the Act;

(

g) revenue from the administration of estates, trusts and agencies;

(

h) commissions from real estate sales net of commissions paid to other real

estate brokers;

(

i) revenue from real estate held for investment;

(

j) revenue from real estate held for sale, net of depreciation, property taxes and

all other operating expenses;

(

k) net gains or losses from futures, options, short selling or similar instruments

acquired other than for hedging purposes;

(

l) net gains or losses on the sale of investments or other assets;

(

m) operating revenue not included under clauses (

a) to (l);

(

n) interest expense on moneys received for guaranteed investments, savings or

other deposits, debentures, notes, certificates of indebtedness and on bank or

other borrowings;

(

o) salaries, pension contributions and other staff benefits;

(

p) operating expenses, including depreciation and amortization of office

premises, equipment and leasehold improvements held for the company’s

own use;

(

q) operating expenses, including depreciation of real estate held for investment;

(

r) operating expenses not included under clauses (

n) to (q);

(

s) amounts recorded as amortization or write-off of any intangible assets;

(

t) provisions for known, probable and possible losses of any kind;

(

u) income or loss before income taxes and extraordinary items;

(

v) taxes on income, indicating the amount, if any, by which current income taxes

have been increased or decreased as a result of tax deferrals;

(

w) income or loss before extraordinary items;

(

x) extraordinary items shown separately if they are material, less related income

taxes, if any;

(

y) net income or loss for the period; and

(

z) earnings per share.

(2) Despite subsection (1), any item required to be disclosed on the income statement

may be disclosed in the notes to the financial statements or in another financial

statement or, if the amount of the item is not significant, it may be combined with

another item on the income statement.

Statement of retained earnings

34 Every statement of retained earnings must set out separately at least

(

a) the balance of the retained earnings or deficit at the end of the preceding

period;

(

b) the additions to and deductions from the retained earnings or deficit during the

current period showing at least

(

i) the net income or loss for the period,

(ii) the dividends declared on common shares, and, set out separately, on

shares other than common shares, and

(iii) the prior period adjustments, including a description; and

(

c) the balance of the retained earnings or deficit at the end of the current period.

Statement of changes in financial position

35 Every statement of changes in financial position must set out separately

(

a) the changes in cash and cash equivalents resulting from the activities of the

company during the period;

(

b) the components of cash and cash equivalents; and

(

c) cash flows, including cash flows from the company’s operating activities,

financing activities and investing activities, set out separately.

Balance sheet

(1) Every balance sheet must set out separately as assets at least

(

a) cash, bank term deposits and deposits or similar instruments with regulated

financial institutions other than the company;

(

b) securities, showing separately at least

(

i) securities issued or guaranteed by Canada and any province of Canada,

stating the basis of valuation, and parenthetically indicating their

aggregate market value,

(ii) short term paper not included under clause (a), stating the basis of

valuation, and parenthetically indicating its aggregate at market value,

(iii) bonds, debentures and like securities not included under clause (

a) or

subclause (

i) or (ii), stating the basis of valuation and parenthetically

indicating their aggregate market value,

(iv) shares, other than shares of subsidiaries and securities dealers,

distinguishing common shares from other shares, stating the basis of

valuation and parenthetically indicating their aggregate market value,

(

v) investment in subsidiaries, valued on the equity method where the

financial statements are non-consolidated, and

(vi) investment in securities dealers, valued on the equity method where the

financial statements are non-consolidated, and where the relationship of

the securities dealer to the company is that of a subsidiary or a body

corporate under significant influence;

(

c) the amounts that are owing to the company, whether on account of a loan or

otherwise, from subsidiaries and other equity accounted-for investees;

(

d) investment income that is due and accrued if it is not included with

investments;

(

e) advances to and fees receivable from estates, trusts and agencies;

(

f) loans to individuals, including investments under clause 44(1)(

g) of the Act;

(

g) loans to persons other than individuals, including investments under clause

44(1)(

g) of the Act;

(

h) mortgages, stating the basis of valuation;

(

i) office premises, equipment and leasehold improvements, stating

(

i) the basis of valuation,

(ii) the amount of accumulated allowance for depreciation and

amortization,

(iii) if valued on the basis of an appraisal, the date of the appraisal,

(iv) if the appraisal took place within five years before the date to which the

balance sheet is made up, the disposition in the accounts of the company

of any amount added to or deducted from the assets on appraisal, and

(

v) if the appraisal was conducted by appraisers independent of the

company;

(

j) real estate held for investment stating the basis of valuation and the amount of

the accumulated allowance for depreciation;

(

k) real estate held for sale, stating the basis of valuation and the amount of

accumulated allowance for depreciation; and

(

l) assets not included under clauses (

a) to (k).

(2) Every balance sheet must set out separately as liabilities at least

(

a) liabilities in respect of demand deposit accounts;

(

b) debentures, bonds and similar securities issued by a loan company;

(

c) moneys received for guaranteed investment by a trust company;

(

d) interest due and accrued on deposits, debentures or guaranteed certificates, if

not included with the corresponding liability;

(

e) bank loans and overdrafts, including interest due and accrued;

(

f) money borrowed under

Section 41 of the Act, including interest due and

accrued;

(

g) subordinated notes;

(

h) liability for current income taxes;

(

i) dividends declared but not paid;

(

j) deferred income;

(

k) amounts owing by the company to its directors, officers and shareholders,

excluding amounts owing on deposits;

(

l) amounts owing by the company to subsidiaries and to other equity accounted-for investees;

(

m) liabilities not included under clauses (

a) to (l), segregating those that arose

other than in the ordinary course of business; and

(

n) deferred income taxes.

(3) Every balance sheet must set out separately as shareholders’ equity at least

(

a) the authorized capital of the company, giving the number of each class of

shares, and a brief description of each such class indicating

(

i) dividend rates on preference shares and whether or not they are

cumulative,

(ii) the redemption and retraction prices of redeemable or retractable shares,

and

(iii) the existence of conversion provisions, and details of any changes

during the year;

(

b) the issued capital of the company, giving the number of shares of each class

issued and outstanding, and showing the number of shares of each class

issued since the date of the last balance sheet and the amount received,

together with the arrears, if any, of dividends for cumulative preference

shares; and

(

c) retained earnings or deficit.

(4) Despite subsections (1) to (3), any item required to be disclosed on the balance

sheet may be disclosed in the notes to the financial statements or in another

financial statement or, if the amount of the item is not significant, it may be

combined with another item on the balance sheet.

Notes to the financial statements

37 The financial statements of a company must disclose the following matters where they

arise, and disclosure may be made by way of notes to the financial statements:

(

a) a description of all significant accounting policies adopted by the company;

(

b) particulars of any change in accounting principles or practice or in the method

of applying any accounting principle or practice made during the period that

affects the comparability of any of the statements with any of those of the

preceding period, and the effect of any such change upon the income or loss

for the period;

(

c) contractual obligations and commitments by the company to make

expenditures that are abnormal in relation to the company’s financial position

or usual business operations;

(

d) contractual obligations in respect of long term operating leases including, in

the period in which a transaction is effected, the principal details of any sale

and lease-back transaction;

(

e) contingent liabilities and other obligations that might involve losses not

provided for in the accounts, stating their nature and an estimate of the

amount of the contingent loss, or a statement that an estimate cannot be made,

and whether any settlement resulting from the resolution of the contingency is

expected to be accounted for as a prior period adjustment or as a charge to

profit and loss in the period in which the settlement occurs;

(

f) if the company has contracted to issue shares or has given an option, right or

warrant to purchase shares, the class and number of shares affected, the price

and the date of issue of the shares or exercise of the option or like instrument;

(

g) the amount of the company’s unfunded obligation for its employees’ pension

fund indicating the manner in which the company proposes to satisfy the

obligation;

(

h) any event or transaction occurring between the date of the financial

statements and the date of their completion that does not relate to conditions

that existed at the date of the financial statements, but results in significant

changes to assets or liabilities in the subsequent period or is likely to or may

have a significant effect on future operations of the company;

(

i) the amount of any loans made contrary to the conflict of interest provisions of

the Act at any time during the period to individuals or bodies corporate, or

investments made in bodies corporate, contrary to the conflict of interest

provisions of the Act;

(

j) the basis of translation of amounts from currencies other than the currency in

which the financial statements are expressed together with the accounting

treatment used for any unrealized gains or losses related thereto;

(

k) foreign currency restrictions that affect the assets of the company;

(

l) any liability secured on any asset of the company, stating the nature and

amount of the encumbrance on each asset and identifying the lender if the

lender is an affiliate;

(

m) any default by the company in principal, interest, sinking fund or redemption

provisions with respect to any issue of its debt obligations;

(

n) the amount of arrears of dividends on any class of shares and the date to

which the dividends were last paid;

(

o) any restriction in the articles or by-laws of the company or by contract on the

payment of dividends;

(

p) particulars, in

summary form, of amounts recorded in the financial statements

as contributed surplus;

(

q) if the company is a trust company, particulars, in

summary form, of those

assets held in trust and earmarked with respect to moneys received for

guaranteed investment;

(

r) particulars for reconciling the effective income tax rate with the statutory

income tax rate;

(

s) information segmenting the company’s total operations by country and by

profit centre function;

(

t) details of any economic dependency of the company on a person because the

company is conducting a significant volume of business with the person, and

separately, details of any circumstance that might call into question the future

viability of the company;

(

u) details of all transactions entered into with any related parties including a

description of the nature and extent of the transaction, a description of the

nature of the relationship, amounts due to or from related parties and a

description of all such transactions that constitute contraventions of the Act;

(

v) details with respect to the method used to account for any amalgamations or

business combinations, the net assets purchased or acquired in the business

combination, the consideration given and other pertinent information;

(

w) details with respect to any prior period adjustment, including a description of

the adjustment and its effect on current and prior periods;

(

x) details, by major asset class, of the aggregate carrying value of loans that were

subject to troubled loan refinancing or restructuring during the period;

(

y) details, by major asset class, of provisions for known, probable and possible

losses stated in the form of a continuity

schedule showing opening balances,

changes during the period and closing balances.

Part VII - Capital Base

(1) In this Part, “book value” with respect to an asset means the cost or amortized cost

of the asset less accumulated depreciation, provisions or allowances for losses, and

received but unearned interest.

(2) For the purposes of this Part, “investment” does not include a loan, whether secured

or unsecured, or any investment in real estate or in a subsidiary.

(1) For the purpose of the definition of “capital base” in the Act, the capital base of a

licensed company shall be calculated by subtracting required deductions from the

aggregate of its permanent capital and its non-permanent capital.

(2) For the purposes of subsection (1), the amount of non-permanent capital may not

exceed fifty percent of permanent capital.

(3) For the purposes of subsection (1),

(a) “permanent capital” is the aggregate of

(

i) share capital with no purchase and redemption privileges, that is non-cumulative, and if convertible, is only convertible into other shares

qualifying as permanent capital,

(ii) contributed surplus, and

(iii) retained earnings or deficit;

(b) “non-permanent capital” is the aggregate of

(

i) share capital with purchase or redemption features, or that is

cumulative, and if convertible, is convertible into a form other than

permanent capital,

(ii) subordinated notes, bonds, debentures and other subordinated debt

instruments,

(iii) subordinated shareholder’s loans, and

(iv) deferred income taxes payable;

(c) “required deductions” are the aggregate of

(

i) goodwill and other intangible assets,

(ii) the aggregate of equity investments in a subsidiary or an associated

company that is a trust or loan company using the equity method of

accounting, to the extent necessary to meet its capital base requirement,

plus the book value of any other investments in the subsidiary or

associated company less the company’s proportionate ownership of the

unused capital base of the subsidiary or associated company,

(iii) the aggregate of equity investments in a subsidiary or associated

corporation using the equity method of accounting plus the book value

of other investments where the subsidiary or associated corporation is

regulated as a bank, insurer or securities dealer but not including a loan

or trust company,

(iv) the aggregate of equity investments in a subsidiary or associated

corporation using the equity method of accounting plus the book value

of other investments in excess of two percent of the parent company’s

total assets, where the subsidiary or associated corporation is not one

that is included in sub-clauses (ii) and (iii),

(

v) the market value deficiency of securities, except securities issued or

guaranteed by a federal or provincial government,

(vi) the market value deficiency of real estate, except real estate used as

office premises of the licensed company,

(vii) deferred income tax recoverable,

(viii) deferred foreign currency translation losses net of the impact of

hedging transactions, and

(ix) the amount of investments in excess of limits imposed by the Act or

these regulations; and

(d) “unused capital base” is the aggregate of authorized borrowings of the

subsidiary or associated corporation less actual borrowings, divided by the

capital base.

40 For the purposes of

Section 39, the amount of a company’s retained earnings or deficit

shall be determined as set out in

Part VIII.

(1) For the purposes of

Section 39, the market value of the investments of a company

shall be determined as set out in this Section.

(2) The market value of investments described in this

Section shall be determined as of

the valuation date.

(3) In this Section, the “valuation date” for determining the market value of an

investment is the date as of which the capital base of the company is calculated.

(4) A share that is listed on any stock exchange shall be valued at its closing sale price

on the valuation date or, if there is no sale price reported for the share on the

valuation date, at the more recent of

(

a) the average of the most recent bid and asked prices for the share; and

(

b) the most recent sale price published for the share.

(5) An investment that is not listed on any stock exchange shall be valued,

(

a) if bid and asked prices for the investment have been available to the public

within sixty days before the valuation date, at the average of the most recent

available bid and asked prices;

(

b) if no bid and asked prices for the investment have been available to the public

within sixty days before the valuation date, at the value for the investment that

is determined by a valuator appointed for that purpose; and

(

c) if a value for the investment has not been determined under clause (

a) or (b),

at the value calculated by reducing the book value of the investment by

twenty-five percent on the first anniversary of the acquisition of the

investment and by fifty percent on the second anniversary.

(6) If a determination of the market value of an investment in preferred shares under

subsection (4) or clause (5)(

a) results in a value that is not representative of the true

value of the investment and the shares

(

a) have a variable dividend rate that is altered periodically in accordance with a

predetermined index; and

(

b) are part of an underwriting in which the issuer raised at least fifty million

dollars ($50,000,000.00) in the initial issue,

the determination of the market value of the shares shall be made by a valuator

appointed for that purpose.

(7) For the purposes of clause (5)(

b) and subsection (6), in determining the value of an

investment, the valuator shall consider the most recent audited financial statements

of the body corporate that issued the investment.

(8) No valuation done under clause (5)(

b) or subsection (6) may be completed more

than six months before the valuation date.

Part VIII - Retained Earnings and Deficits in the Definition of Capital Base

42 For the purpose of calculating the capital base of a company, the amount of the

company’s retained earnings or deficit shall be determined in accordance with the

requirements set out in this Part.

Investments in subsidiaries

43 The equity method of accounting shall be used to calculate a company’s investment in the

shares of a subsidiary.

Swaps, futures and similar instruments

(1) In this

Section

(a) “financial future” means a contract to buy or sell a standard quantity of a

specified financial instrument on a specified future date at an agreed price;

(b) “interest rate swap” means an agreement between two parties to exchange

interest payments, usually in which one party agrees to make payments at a

fixed interest rate and the other party agrees to make payments at a floating

interest rate, predicated on notional principal value.

(2) If a company enters into an interest rate swap or similar agreement, and the purpose

of the transaction is to hedge against interest rate or similar risks associated with its

specific assets and liabilities or groups of specific assets and liabilities through a

compensatory price movement contract, the net interest shall be recorded in the

income accounts as it occurs.

(3) If a company acquires a financial future, financial option or similar instrument and

the purpose of the transaction is to hedge against interest rate or similar risks

associated with its specific assets and liabilities or groups of specific assets and

liabilities through a compensatory price movement contract, any gain or loss shall

be deferred until the closure of the hedge.

(4) If a company acquires a financial future, financial option or similar instrument other

than for hedging purposes, the instrument shall be marked-to-market daily on an

individual contract basis, any unrealized loss shall be recognized on that basis in the

income accounts, and any unrealized gain shall be deferred until realized.

(1) In this Section, “covered option” means a contract under which the purchaser

acquires the right to require the company to sell to it, within or at a specified time,

for a specified amount, specified securities that the company owns at the time of

contracting.

(2) Any premium received for writing a covered option shall be recorded as a reduction

in the book value of the applicable investment until the expiry or exercise of the

option.

(3) On the expiry of a covered option, the premium received shall be recorded as

income.

(4) On the exercise of a covered option, the premium received shall be included in the

gain or loss on the disposition of the applicable investment.

Short selling and uncovered options

(1) In this Section, “short” in relation to a sale of securities by a company means a sale

of securities that the company does not own or have the right to acquire at the time

of making the sale.

(2) If a company sells equity or debt obligations short,

(

a) the investment in the short sale contract shall initially be recorded by treating

the amount due from the investment dealer as an investment under subsection

(1) of

Section 48 of the Act;

(

b) after the recording referred to in clause (a), the investment in the short sale

contract shall be marked-to-market daily, on a contract-by-contract basis, with

the accumulated losses, if any, recorded in the company’s income accounts;

and

(

c) all unrealized gains on the investment in the short sale contract shall be

deferred except to the extent that the recording of gains would increase the

investment to its original value.

(1) Any premium received for writing an uncovered call option shall be recorded as

deferred income until the option lapses or is exercised or until an equal offsetting

contract is purchased.

(2) If an uncovered call option

(

a) lapses unexercised, the premium shall be recorded as income;

(

b) is exercised, the premium shall be included in the gain or loss on the

transaction; or

(

c) is offset by the purchase of an equal offsetting contract, the premium

previously received shall be netted against the premium paid on the contract

purchased, and the net gain or loss shall be recorded in the income accounts at

the time of the purchase.

(3) Every uncovered call option shall be marked-to-market daily on a contract-by-contract basis with the accumulated losses, if any, recorded in the income accounts.

(4) No unrealized gains on an uncovered call option shall be recorded except to reverse

previously recorded losses on the transaction.

Financial instruments generally

(1) When a company enters into a transaction mentioned in Sections 45 to 47, the

company shall determine whether the transaction is made for the purpose of either

hedging or capital appreciation and shall document its determination with its

accounting records.

(2) All unrealized gains and losses on transactions mentioned in Sections 45 to 47 that

are entered into for hedging purposes shall be deferred until the closure of the

hedge.

(3) All unrealized losses arising from transactions mentioned in Sections 45 to 47 that

are entered into for capital appreciation purposes shall be marked-to-market daily on

a contract-by-contract basis, and all unrecognized gains shall be deferred on a

contract-by-contract basis until the termination of the applicable agreement.

(4) After a company has made a determination under subsection (1) in respect of a

transaction, the company shall not change its method of accounting for gains and

losses arising from the transaction.

Asset-backed securities

(1) In this Section, “asset-backed securities” means an arrangement for the sale of

assets that entitles the purchaser to an undivided beneficial interest in a pool of

assets.

(2) If a company has approved issuer status granted by Canada Mortgage and Housing

Corporation under the CMHC mortgage-backed securities program, any gain on

disposition arising from the sale of interests in pools of mortgages under that

program may be recorded immediately in the income accounts.

(3) Any gain on disposition arising from the sale by the company of interests in pools

of National Housing Act (Canada) mortgages under any mortgage-backed securities

program may be recorded immediately in the income accounts.

(4) If, under any asset-backed securities arrangement not referred to in subsection (2) or

(3), the company sells interests in pools of assets and retains administration of the

assets on behalf of the purchasers, a portion of the gain on the sale, if any, equal to

the maximum loss sustainable by the company under any recourse provision of the

arrangement shall be treated as deferred income until the maturity of the asset-backed securities.

Profit recognition on asset sales

(1) If a company sells an asset to a purchaser who is not a restricted party and the

purchaser makes a cash down payment of at least twenty-five percent of the

purchase price, the determination of any gain or loss on the sale may be made

without taking into account any reduced rate financing on the sale offered to the

purchaser and any commercial and reasonable performance guarantee given to the

purchaser.

(2) If a company sells an asset to a purchaser who is not a restricted party and the

purchaser does not make a cash down payment of at least twenty-five percent of the

purchase price, the determination of any gain or loss on the sale shall take into

account the estimated costs of any performance guarantee given by the company

and any forbearance of interest.

51 Gains and losses on the sale of securities must be recognized in the income accounts at

the time of the sale.

Real estate project accounting

52 Indirect costs, including lease-up costs and general and administrative expenses that do

not specifically relate to real estate projects under development, must be charged to

expense in the income accounts as they are incurred.

53 The book value of a real estate development project shall not exceed the current market

value of the project as reduced by the estimated costs of disposition.

(1) Revenue from the sale of real estate shall not be recognized until

(

a) the significant risks and rewards of ownership have been transferred to a

purchaser in good faith in a transaction in which all significant acts have been

completed and the company does not retain any continuing managerial

involvement in the degree usually associated with the ownership of real estate;

and

(

b) the collection of the proceeds from the sale is reasonably assured.

(2) For the purpose of subsection (1), significant acts are not considered to be

completed until such time as all parties are unconditionally bound by the terms of

the contract.

55 Financing and carrying costs for vacant real estate held for resale or development must be

charged to the income accounts as they are incurred.

Recognition of fee income

56 In Sections 57 to 67, “loan fees” means the total of all placement fees, application fees,

management fees and all other similar fees payable in respect of a loan, mortgage or lease

except those that are unconditionally refundable, and includes

(

a) loan fees charged to a debtor, mortgagor or lessee for arranging or originating

a loan, mortgage or lease;

(

b) commitment fees, including standby and guarantee fees and fees of like

nature; and

(

c) interest rate pay-down fees.

57 Sections 58 to 67 apply if the loan fees for a loan, mortgage or lease or a proposed loan,

mortgage or lease exceed the lesser of

(

a) one thousand dollars ($1,000.00); or

(

b) one percent of the principal amount of the loan, mortgage or lease.

58 For the purpose of calculating the amount of loan fees, fees charged to a third party are

deemed to be fees charged to a debtor, mortgagor or lessee if the third party and the

debtor, mortgagor or lessee are related or associated, or if the third party sold the

mortgaged property to the mortgagor.

(1) Loan fees must be recognized as revenue, as an adjustment of the contractual

interest rate over the deemed expected term of the loan to which the fees relate, and

must be amortized on a time proportion basis so as to result in a constant interest

rate adjustment to the yield on the loan.

(2) The deemed expected term of a loan is the contractual maturity date unless,

(

a) the borrower has a right to renew the loan according to the contract terms, in

which event the expected term is deemed to be extended in accordance with

the right;

(

b) the maturity date according to the contract occurs within the year, and in light

of the economic substance of the financing it may reasonably be expected that

the loan will be renewed, in which event the expected term is deemed to be

three years; and

(

c) there is no contractual maturity date, in which event the expected term is

deemed to be five years after the contract date.

(3) For the purposes of subsection (2), the deemed expected term of a loan is not

affected by any prepayment rights that the borrower is entitled to exercise.

(1) Direct costs relating to a loan, mortgage or a lease, including finders fees and

commissions, legal fees and appraisal and other direct costs paid to independent

third parties, may be recognized on the same basis as loan fees.

(2) Indirect costs including supervisory and overhead costs associated with loans,

mortgages and leases shall be expensed in the period in which they are incurred.

(1) Nonrefundable commitment fees shall be accounted for as deposits and may not be

recognized as revenue while the commitment, by its terms, remains unexpired.

(2) A commitment fee for an expired unexercised commitment shall be recognized as

revenue as of the date of expiry.

(3) A commitment fee for a commitment that is exercised shall be treated as a loan fee

for the resulting loan by the company.

(1) Unconditionally refundable fees shall be accounted for as deposits until the fees are

refunded.

(2) Refundable fees subject to conditions shall be treated as deposits until the

conditions are resolved, at which time the residual amount shall be treated as loan

fees.

(1) When a loan, mortgage or lease is sold or the balance of the loan, mortgage or lease

is extinguished in the ordinary course of business, any related unamortized loan fees

shall be recognized as revenue upon the sale or extinguishment.

(2) Subsection (1) does not apply in the case of sale unless all risks and rewards of

ownership have been transferred in good faith to an independent third party.

64 If the terms of a loan, mortgage or lease permit prepayments of principal in an amount

that exceeds twenty-five percent of the balance outstanding and a prepayment is made, the

amortization of the unamortized loan fees may be correspondingly accelerated in the

proportion that the amount of the prepayment bears to the balance outstanding.

65 When a company ceases to recognize the contractual interest rate on a loan, mortgage or

lease as income because of the doubtful collectibility of the balance of the loan, mortgage

or lease, no unamortized fees shall be amortized until the loan, mortgage or lease ceases

to be in arrears.

(1) When a loan, mortgage or lease is renegotiated because of adverse circumstances of

the debtor, mortgagor or lessee, or is otherwise restructured, any unamortized fees

from the original loan, mortgage or lease shall be treated as loan fees for the

renegotiated transaction.

(2) If proceedings for foreclosure or under a power of sale in a mortgage are begun, any

unamortized loan fees for the mortgage shall be netted against the outstanding

balance of the mortgage.

67 In any transaction in which a company acquires an asset, any fee received by the

company from the vendor to complete the transaction shall be recorded as an adjustment

to the purchase price of the asset.

Troubled loan refinancing or restructuring

68 For the purposes of Sections 69 to 74, a troubled loan refinancing or restructuring occurs

when a company, for economic or legal reasons related to the borrower’s financial

difficulties, grants a concession to the borrower that it would not otherwise consider.

(1) The amount of any loss resulting from a troubled loan refinancing or restructuring

in which only the repayment terms of the loan are modified shall be determined by

calculating the discounted value of the total future cash receipts for the loan under

the modified terms, and subtracting that amount from the discounted value of the

total future cash receipts for the loan under the original terms.

(2) A loss determined under subsection (1) must be recorded as a loss in the income

accounts at the time of the refinancing or restructuring and the book value of the

loan adjusted accordingly.

(1) If the discounted value of the total cash receipts for a loan under a troubled loan

refinancing or restructuring is greater than the discounted value of the total cash

receipts for the original loan, interest income for the refinanced or restructured loan

shall be calculated in accordance with the effective interest rate determined under

subsection (2).

(2) For the purpose of subsection (1), the effective interest rate for the refinanced or

restructured loan is the discount rate that equates the present value of future cash

receipts under the refinanced or restructured loan with the amount of the recorded

investment.

(1) Any payment for a loan following a troubled loan refinancing or restructuring that is

received

(

a) within six months after the refinancing or restructuring, if the payment is

collectible monthly; or

(

b) within one year after the refinancing or restructuring, if the payment is

collectible other than monthly,

shall be applied in reduction of the outstanding principal amount of the loan, and

shall not be attributed to interest income.

(2) After subsection (1) ceases to apply, interest income may be recorded at the

effective interest rate of the loan, which is deemed to be the discount rate that

equates the present value of the future cash receipts under the terms of the

refinancing or restructuring with the amount of the outstanding principal.

(1) If a troubled loan refinancing or restructuring involves the partial repayment of the

loan by way of consideration other than cash and modifies the repayment terms of

the loan,

(

a) the fair market value of the non-cash consideration must be determined and

accounted for as a partial repayment of the loan; and

(

b) any loss resulting from the refinancing or restructuring shall be calculated in

accordance with

Section 69.

(2) For the purposes of subsection (1), no value shall be ascribed to any contingent

consideration receivable such as rights to future profit participations.

(3) No amount payable to the company as contingent consideration may be recognized

as interest or other income until it is received.

73 All legal fees and other costs incurred with respect to a troubled loan refinancing or

restructuring shall be expensed as they are incurred.

(1) All fees received by a company in respect of a troubled loan refinancing or

restructuring shall be treated as deferred income until the loan is paid in full.

(2) Despite subsection (1), if, under a troubled loan restructuring or refinancing, the

borrower provides additional security having a market value at least equal to fifty

percent of the value of the security given under the original loan, the fees received

by the company in respect of the refinancing or restructuring shall be accounted for

as set out in Sections 56 to 67.

Favourable rate financing

(1) This

Section applies in respect of a loan made by a company to a third party

(

a) at an interest rate that is more than two percentage points below the

company’s normal lending rate for comparable loans with similar collection

risks; and

(

b) in connection with the disposition of real estate acquired by the company

through a mortgage foreclosure or a loan restructuring.

(2) The amount of the discount on a loan described in subsection (1) is the difference

between

(

a) the discounted value of the total future cash receipts for the loan, calculated

using the company’s normal lending rate for comparable loans with similar

collection risks in lieu of the contractual interest rate for the loan; and

(

b) the discounted value of the total future cash receipts for the loan at the

contractual interest rate.

(3) A discount on a loan determined under subsection (2) must be recorded as a loss in

the income accounts at the time the loan is made and the book value of the loan

adjusted accordingly.

Provision for losses

(1) Any accumulation for known, probable and possible losses shall be deducted from

the applicable asset.

(2) No sum in addition to provisions for known, probable and possible losses and

bookable contingencies may be appropriated.

(3) Any addition to an accumulation for known, probable and possible losses shall be

created by a charge to the income accounts.

77 A loss of any nature shall be included in the income accounts when the loss is incurred.

Part IX - Capital Base Requirements

(1) Subject to subsections (2), (3) and (4), the total amount

(

a) received as deposits and otherwise borrowed by a licensed provincial loan

company; and

(

b) received as deposits and otherwise borrowed by a licensed provincial trust

company,

shall not exceed, at any time, an amount equal to ten times its capital base.

(2) Amounts borrowed by a licensed provincial company by way of subordinated notes

and by way of mortgages on real estate owned by the company shall not be included

in a determination of a total amount under subsection (1).

(3) On the application of a licensed provincial company, the Superintendent, by order

increase the total amount that may be borrowed or received by the company to an

amount equal to such multiplier in excess of ten times but not exceeding twenty-five times its capital base as may be set out in the order and subsections (1) and

(2) shall be deemed to apply to such increased amount, substituting the new multiplier

for “ten” in subsection (1).

(4) A licensed provincial company may exceed, at any time, the limit on its borrowing

multiple as set out in subsection (1) or as set out in an order under subsection (3) if

the board of directors has approved, by a resolution passed on an annual basis, the

exceeding of the limit and so long as the amount by which the limit is exceeded is

invested as set out in

Section 79.

(5) No order shall be made under subsection (3) unless the application of the company

is accompanied by a certified copy of a special resolution of the company

supporting the increase requested under subsection (3).

(6) At least once each year, the Superintendent shall review the borrowing multiple

authorized for each company to determine if the borrowing multiple is appropriate.

79 For the purposes of subsection (4) of

Section 78 the manner for investing amounts that

exceed the limit on the borrowing multiple of a licensed company is in those investments

identified as liquid assets in clause 87(2)(a).

Part X - Total Assets

80 Subject to

Section 81, for the purpose of the definition of “total assets” in the Act, the

assets of a licensed provincial company are calculated by

(

a) adding the book value of all assets of the licensed provincial company;

(

b) subtracting from the amount determined in clause (a)

(

i) the book value of goodwill and other intangible assets including

copyrights and patents,

(ii) the book value of deferred charges, and

(iii) the amount, if any, that is the excess of the aggregate book value over

the aggregate market value of all assets that are securities and debt

obligations issued or guaranteed by any government, including a

municipal government, or by any government agency.

81 For the purposes of

Section 80

(

a) provisions or allowances for losses of a general nature must be deducted from

the most closely applicable class of assets;

(

b) cash deposits in financial institutions must be offset against overdrafts with

financial institutions;

(

c) the equity method of accounting must be used when calculating the

company’s investment in the shares of a subsidiary;

(

d) assets administered for estates, trusts and agencies must not be included in the

calculation of total assets; and

(

e) the book value of an asset is the cost or amortized cost of the asset less

accumulated depreciation, provisions or allowances for losses and received

but unearned interest.

(1) For the purposes of subsection (1) of

Section 49 of the Act, the percent of its total

assets that a licensed provincial company shall maintain in specified investments is

forty-five percent.

(2) For the purposes of subsection (1) specified investments includes

or by any of their agencies, or issued by a university, municipality, hospital or

a school board, in Canada;

agencies, or to a university, municipality, hospital or a school board, in

(

c) securities on which payment is ensured by rates or by the levy of a tax by a

school or municipal corporation under a law of Canada or of a province, on

property situated within the jurisdiction of the school or municipal

corporation;

(

d) first mortgages upon real estate in Canada in an amount not greater than

seventy-five percent of the market value of the charged property, unless

approved or insured within the meaning of the National Housing Act or

unless the excess amount is guaranteed or insured by the Government of

Canada, or of a province or by any agency thereof or under a hypothec

insurance policy issued by an insurance company authorized to carry on

business in Canada;

(

e) securities on which payment or principal and interest is guaranteed by the

of the sums voted each year for that purpose;

(

f) debt securities including banker’s acceptances, other than subordinated debt

securities, issued or guaranteed by a financial institution duly authorized to

take deposits in Canada;

(

g) deposits with financial institutions duly authorized by statute to take deposits

in Canada; and

(

h) cash or cash and any combination of the assets enumerated above.

Part XI - Self Dealing

83 For the purposes of clause 182(1)(

h) of the Act, a licensed company may enter into a

transaction to sell or redeem its own subordinated notes and its own shares to or from a

restricted party.

84 For the purposes of clause 182(3)(

d) of the Act and subject to Sections 35 to 58 of the

Act, a licensed company or a subsidiary of a licensed company may enter into sales and

purchases to or from a restricted party of

province;

(

b) mortgage loans that are insured by the Canada Mortgage and Housing

Corporation or Mortgage Insurance Corporation of Canada that are not in

default;

of any province; and

(

d) certificates or notes issued or guaranteed by a financial institution that is not a

restricted party of the licensed company, that are issued in Canada and have a

term to maturity when issued of one year or less but not including stocks,

bonds or subordinated debentures,

that are undertaken at readily identifiable prevailing market rates if the instruments are

transferable.

Part XII - Classes of Assets

(1) Subject to the terms, conditions and restrictions, if any, imposed on its licence, a

licensed provincial company may not invest more than ten percent of its total assets

(

a) debt instruments made under clause 44(1)(

c) of the Act; and

(

b) business or commercial loans made under clause 44(2)(

c) of the Act,

if the investment is made for the purpose of financing the acquisition, development

and construction of real estate for commercial, industrial or residential purposes in

the circumstances set out in subsection (2).

(2) Subsection (1) applies in respect of a debt instrument or loan if

(

a) the borrower’s equity interest is less than twenty-five percent of the project in

respect of which the debt instrument is entered into or the loan is made; and

(

b) a term of the debt instrument or loan agreement provides

(

i) for fee income to be earned by the licensed provincial company, its

subsidiaries or by any restricted party to the company that, if the fees

were considered as a cost of borrowing, would increase the cost of

borrowing by two or more percentage points,

(ii) that interest on the debt instrument or loan shall be paid by means of an

interest reserve,

(iii) that interest on the loan shall be paid by means of capitalizing it as

principal, or

(iv) that the licensed provincial company or its subsidiaries or any restricted

party to the company shall participate in the profit or the equity of the

project in respect of which the loan is made or debt instrument is

entered into.

86 A licensed provincial company may not invest more than an amount equal to the

proceeds of its borrowings raised outside Canada plus five percent of its total assets in

(

a) bonds, debentures or other forms of indebtedness of a body corporate

incorporated outside of Canada;

(

b) shares of a body corporate incorporated outside of Canada unless the shares

are listed on a recognized Canadian stock exchange;

(

c) real estate located outside of Canada;

(

d) loans on the security of real estate or leaseholds outside Canada; and

(

e) mutual fund shares or units that are traded only by dealers who are not

registered with a securities commission in Canada.

Part XIII - Liquidity

(1) For the purpose of

Section 42 of the Act, a licensed provincial company shall

maintain unencumbered liquid assets, net of specified borrowings, at least equal to

twenty percent of its short-term liabilities coming due and payable within 100 days

or less.

(2) For the purposes of this

section [Part]

(a) “liquid assets” mean[s]

(

i) at book value, cash and demand deposits in a financial institution duly

authorized to take deposits in Canada,

(ii) at book value, treasury bills of Canada or a province,

(iii) at book value, term deposits, bearer deposit notes and other similar

instruments issued by a financial institution duly authorized to take

deposits in Canada that have a term of 100 days or less or mature within

100 days,

(iv) at book value, bankers’ acceptances that mature within one year,

(

v) at market value, securities, other than securities referred to in subclause

municipality,

(vi) at book value, demand loans other than loans to an individual, which are

fully secured by treasury bills, term deposits, bearer deposit notes,

bankers’ acceptances which mature in a year or less, or securities issued

and

(vii) interest accrued on the items referred to in subclauses (i), (ii), (iii), (iv),

(

v) and (vi);

(b) “short-term liabilities” mean[s]

(

i) deposits payable within 100 days or on 100 days’ notice or less

including demand deposits,

(ii) bonds, debentures, notes, loans or other similar liabilities payable within

100 days or on 100 days’ notice or less, excluding any specified

borrowing,

(iii) loans or securities guaranteed by the licensed provincial company that

are payable within 100 days or on 100 days’ notice or less, and

(iv) interest accrued on the items referred to in subclauses (i), (ii) and (iii);

and

(c) “specified borrowings” mean[s] demand loans or loans having an original

term to maturity of seven days or less, including accrued interest.

88 The total amount of liquid assets maintained by a licensed provincial company is

calculated in accordance with the specifications described in Form 5 under the heading

“Unencumbered Liquid Assets” and is the amount calculated as item 10 on the Form.

89 The total amount of deposits and obligations of the licensed provincial company that are

payable in one hundred days or less is calculated in accordance with the specifications

described in Form 5 under the heading “Short-term Liabilities” and is the amount

calculated as item 15 on the Form.

90 Every licensed provincial company shall prepare a liquidity return in Form 5 quarterly as

of the last day of March, June, September and December of each year, and shall file the

return with the Superintendent within thirty days after the end of the period to which it

relates.

Part XIV - Subordinated Notes

91 Every subordinated note issued by a licensed provincial company shall state on its face

(

a) a fixed maturity term;

(

b) the terms of its subordination; and

(

c) all restrictions applicable on redemption or payment of the note.

92 Every subordinated note issued by a licensed provincial company shall state that,

(

a) the redemption or payment of the note at maturity, upon default or otherwise,

will be suspended if there are reasonable grounds to believe that,

(

i) the company is or, after the redemption or payment would be, unable to

pay its liabilities as they become due,

(ii) after the redemption or payment, the realizable value of the company’s

assets would be less than the aggregate of its liabilities, or

(iii) the redemption or payment would cause the company to be in

contravention of the Act or the regulations;

(

b) the note will not be redeemed, paid or otherwise compromised by a company

except on sixty days written notice by the company to the Superintendent; and

(

c) notice referred to in clause (

b) can be satisfied by the noteholder giving the

notice to the Superintendent.

Part XV - Common Trust Funds

93 In this Part

(a) “fund” means a common trust fund;

(b) “investments” means bonds, debentures, guaranteed investment certificates,

shares, warrants, rights to subscribe for or purchase shares, any title to or

interest in the capital assets, property, profits, earnings or royalties of any

undertaking or enterprise commonly evidenced by a certificate or a similar

document or depository receipt;

(c) “participant” means any trust or estate the moneys of which have been

invested in the fund; and

(d) “participation” means the interest of any participant in a fund.

(1) A fund may not be established unless there are trust moneys therein aggregating at

least two hundred thousand dollars ($200,000.00) and unless a written plan of

operation for the fund complying with this

Section has been submitted to the

Superintendent at least thirty days before the start of the operation.

(2) The fund shall be maintained in accordance with the plan of operation and any

amendment thereto must be filed with the Superintendent at least thirty days before

it takes effect.

(3) The plan of operation must set out the manner in which the fund is to be operated

and contain provisions as to

(

a) the particulars of investment powers and restrictions of the fund;

(

b) the computation and allocation of income and the distribution thereof;

(

c) the allocation of the profits and losses of the fund;

(

d) the conditions governing admissions of trust moneys to and withdrawals of

participations from the fund;

(

e) the original unit of participation;

(

f) the form of documentation to be used as evidence of participation;

(

g) the auditing and settlement of accounts of the trust company with respect to

the fund;

(

h) the basis and method of valuing the assets of the fund;

(

i) the basis upon which the fund may be terminated;

(

j) the method by which the plan of operation may be amended; and

(

k) such other matters as may be necessary to define clearly the rights of

participants.

(4) The plan of operation must provide that it is subject to all applicable laws of the

Province of Nova Scotia pertaining to the operation of common trust funds.

(5) The plan of operation must provide for

(

a) the amortization of premiums and discounts on bonds or other obligations;

and

(

b) the allocation of profits and losses and the apportionment thereof between

principal and income.

Units of participation

(1) A fund shall be divided into units of equal value, and the proportionate interest of

each participant is expressed by the number of such units allocated to it.

(2) Upon the establishment of a fund, a trust company shall divide the fund into units of

five dollars ($5.00) or any multiple of five dollars ($5.00), and allocate to each

participant the number of units proportionate to its original investment in the fund.

(3) When additional moneys are admitted to the fund, the amount so admitted must be

equal to the then value of one or more of the units of the Fund, and the number of

units increased accordingly.

(4) Each unit of participation must have a proportionately equal beneficial interest in

the fund, and none may have priority or preference over any other.

(1) No money from any participant may be accepted by a fund if as a result the

participant would have an interest in the fund in excess of ten percent of the book

value of the assets of the fund.

(2) In applying the limitation contained in this Section, if two or more trusts are created

by the same settlor or settlors and as much as one-half of the income or principal or

both of each trust is payable or applicable to the use of the same person or persons,

the trusts shall be treated as one.

Management and ownership of assets in a fund

(1) A trust company has exclusive management and control of any fund that it

maintains.

(2) No participant and no person having an interest in a participant may have

individual ownership of any particular assets in a fund.

(3) All the assets of a fund are at all times considered to be assets held in trust by the

trust company, and title thereto is vested solely in the trust company as trustee.

Admissions and withdrawals of participations

(1) No trust moneys may be admitted to and no participation may be withdrawn from a

fund except on the basis of the trust company’s valuation of the fund and except as

of a valuation date.

(2) The value of the fund and its units shall be determined within ten business days

following the valuation date.

(3) When a participation or any part thereof is withdrawn from a fund, the amount

withdrawn may, in the discretion of the trust company, be paid in cash or rateably in

kind, or partly in cash and partly rateably in kind, but all payments or transfers as of

any one valuation date must be made on the same basis.

(4) No admission of trust moneys to or withdrawal of a participation from a fund is

permitted if the result would be that less than twenty-five percent of the remaining

assets of the fund would be composed of one or more unencumbered liquid assets

that are in a form described in clause 87(2)(a), but this subsection does not apply to

prohibit a rateable distribution upon all participations.

(5) If, because of a change in circumstances, an investment held by a fund does not

continue to meet the eligibility criteria under the plan of operation of the fund for a

new investment, and the state of ineligibility continues for a period of six months,

no admission to or withdrawal from the fund may be made except as set out in

subsection (6).

(6) Admission to and withdrawal from a fund in the circumstances set out in subsection

(5) may be made

(

a) when, because of a change in circumstances, the investment again meets the

eligibility criteria under the plan of operation of the fund for a new

investment; or

(

b) when the investment is eliminated from the fund by means of

(

i) sale,

(ii) distribution in kind to participants, or

(iii) segregation in a liquidation account for the benefit rateably of all the

participants in the fund on the date of the segregation.

(7) No participation may be withdrawn in part only, unless the amount so withdrawn is

equal to the value of one or more full units at the time of the withdrawal.

Participation register

99 A register must be maintained for each fund during the existence of the fund and for a

period of six years after its termination showing, with respect to each participant,

(

a) the date of each admission of trust moneys to the fund, the number of units

allotted and the value at which each unit is allocated;

(

b) the date of each withdrawal, the number of units redeemed and the amount

paid on redemption to the participant;

(

c) the number of units currently held; and

(

d) the share in any liquidating account.

Participation certificates

100 Participations in a fund may be evidenced by certificates, but no trust company

maintaining a fund may issue any document evidencing a direct or indirect interest therein

in any form that purports to be negotiable or assignable.

(1) Not less frequently than once during each period of three months, every trust

company must determine the value of each fund that it maintains and of the units of

participation thereof.

(2) The investments held by a fund shall be valued as set out in subsections (3) to (10).

(3) A share that is listed on any stock exchange shall be valued at its closing sale price

on the valuation date or, if there is no sale price for the share on the valuation date,

at the more recent of

(

a) the average of the most recent bid and asked prices for the share; and

(

b) the most recent sale price published for the share.

(4) Despite subsection (3), if, in the opinion of the trust company, the value of a share

that is determined under subsection (3) does not fairly indicate its market value, the

trust company shall obtain from two members of a stock exchange a written

estimate of the value of the share as of the valuation date, and the value of the share

shall be deemed to be the average of the two estimates.

(5) An investment, other than a mortgage, that is not listed on any stock exchange shall

be valued as of the valuation date

(

a) if bid and asked prices for the investment have been available to the public

within sixty days before the valuation date, at the average of the most recent

available bid and asked prices; or

(

b) at the average of the most recent available quotations of the price of the

investment by two recognized dealers in the securities.

(6) For the purposes of subsections (3) and (5), the sale price, bid and asked prices, and

over-the-counter quotations for an investment that are published in any newspaper

of general circulation in the City of Halifax, in any recognized financial journal or

report, or by any quotation service or that are contained in the records of a stock

exchange are sufficient evidence of the prices and quotations.

(7) The value of an investment in a mortgage is the present value of the mortgage

calculated using the current interest rate to the maturity of the mortgage.

(8) If a dividend on a share has been declared but not received by the fund, and the

dividend is considered to be income under the plan of operation of the fund, the

amount of the dividend shall be deducted from the price of the share unless the

share price is an ex dividend price.

(9) If the fund has purchased an investment and has not paid for it pending delivery of

the investment, the investment shall be valued as an investment held by the fund

and the cash accounts adjusted accordingly.

(10) If the fund has sold an investment and has not delivered it pending receipt of the

sale proceeds, the investment shall be valued as an investment held by the fund at

the net sale price.

Distributions of income

(1) The income of a fund and the apportionment thereof must be determined at each

valuation date.

(2) The income must be distributed to participants not less frequently than quarter-yearly.

(3) For purposes of distribution to participants, the income may be computed at the

option of the trust company either on the basis of income accrued or on the basis of

income actually received.

(4) To facilitate the distribution of accrued but uncollected income, the cash principal

of a fund may be used to the extent necessary.

Investments

(1) The investments of a fund must be kept separate from the trust company’s own

property, and each investment must be so identified in the books of the company to

show clearly the fund to which it belongs.

(2) Despite subsection (1), any moneys of the fund awaiting investment or distribution

may be held on deposit in the savings department of the trust company subject to

payment thereon by the company of interest computed at the current rate and in the

same manner as in the case of ordinary deposits.

(3) The total investment of a fund in

(

a) guaranteed investment certificates of any trust company;

(

b) debentures of any loan company; or

(

c) bonds of, or guaranteed by, any municipal corporation,

may not exceed, in each case, ten percent of the book value of the fund.

(4) The total investment of the fund in investments of or guaranteed by any one person,

other than the obligations referred to in subsection (3), may not exceed five percent

of the book value of the fund.

(5) Subsections (3) and (4) do not apply to investment in obligations issued or

Canada.

(6) The total number of shares held by a fund in any one class of shares of any one

body corporate may not exceed five percent of the number of such shares

outstanding and, if the trust company maintains more than one fund, no investment

may be made that would cause the aggregate investment for all the funds in any one

class of shares of any one body corporate to exceed such limitation.

(7) Not less than twenty-five percent of the value of the assets in a fund may be

maintained in one or more unencumbered liquid assets in a form described in clause

87(2)(a).

Accounting records and register of participants

104 A complete set of accounting records must be maintained for each fund during the

existence of the fund and for six years after its termination and the records must clearly

distinguish items of principal from items of income.

105 The register of participants and all accounting records pertaining to a fund for the period

after that covered by the last accounts passed by a court shall be open to inspection during

the regular business hours of the trust company by any co-trustee or beneficiary of a

participant.

Audit report and financial statements

(1) Every trust company must, at least once during each period of twelve months,

prepare financial statements for each of its funds and cause an audit of each of its

funds to be made by an independent accountant.

(2) The financial statements mentioned in subsection (1) must include

(

a) a list of the investments comprising each fund at the end of the period

covered by the statements and the book value thereof as at the end of the

period covered by the statements;

(

b) a statement of purchases, sales and any investment changes and of revenue

and disbursements since the last statements; and

(

c) appropriate comments as to any investments in default as to payment of

principal and interest.

(3) The trust company must file a copy of the financial statements and audit report for

an audit of each fund under subsection (1) with the Superintendent within ninety

days after the date of the audit report.

(4) The trust company must, without charge, send a copy of the financial statements

and audit report for a fund

(

a) to every co-trustee of a participant in the fund; and

(

b) upon request, to every beneficiary of a participant in the fund.

(5) The reasonable expenses of an audit under subsection (1) shall be paid out of the

fund and charged to principal and income in such proportion as the trust company

considers appropriate.

Administration fees and expenses

(1) A fund may not be treated as a separate trust fund on which commissions or other

compensation is allowable and no trust company maintaining a fund may make any

charge against it for the management thereof nor pay a fee, commission or

compensation out of the fund for management but may reimburse itself out of a

fund for all reasonable expenses incurred by it in the administration of the fund.

(2) In any trust or estate that has moneys participating in a fund, the trust company is

entitled to the management fee or other compensation to which it would otherwise

be entitled in respect of such moneys.

Publicity

108 A trust company may not make representations as to the earnings realized on a fund or the

value of the assets thereof except as is permitted or required under this Part.

Part XVI - Deposit Agents

109 In this Part

(a) “deposit agent” means a person who receives deposits for transmission to a

licensed company; and

(b) “remuneration rates” include commissions, overrides, bonuses and expenses

paid by a licensed company to a deposit agent.

110 Every deposit received in the Province by a deposit agent must be evidenced by a receipt

issued to the depositor in the name of the licensed company with a copy of the receipt

provided to the licensed company.

111 Every deposit received in the Province by a deposit agent from or on behalf of a

depositor must be payable to the licensed company only or be accompanied by a written

direction authorizing the deposit agent to deposit the funds with a licensed company.

112 Every licensed company must file with the Superintendent, within ninety days after its

fiscal year end, a list showing the name and current address of each deposit agent that was

paid by the company for taking deposits in the Province on its behalf during the fiscal

year of the company.

(1) Every licensed company must file with the Superintendent, within ninety days after

its fiscal year end, a

schedule or schedules of remuneration rates expressed as a

percentage of deposits or in dollars, as may be applicable, for all deposit agents

acting on behalf of the company in the Province as of the fiscal year end and

indicate the number of deposit agents to which each

schedule applies.

(2) Every licensed company must file with the Superintendent all changes to its

schedule or schedules or remuneration rates and every change made to the

remuneration rate applicable to a deposit agent in the Province at least ten days

before the rates come into effect.

Part XVII - Loans to Employees

114 For the purposes of subsection (2) of

Section 182 of the Act, a licensed provincial

company that has been in operation for five years may make loans to its employees.

(1) The amount of a loan made under subsection (2) of

Section 182 of the Act shall not

exceed

(a) $150,000.00 where the company has total assets exceeding $100,000,000.00;

and

(

b) fifteen one-hundredths of one percent of the total assets of a company with

total assets of $100,000,000.00 or less.

(2) Despite subsection (1), a loan made under subsection (2) of

Section 182 of the Act

that is secured by the principal residence of the employee or the employee’s spouse

shall not exceed

(a) $300,000.00 where the company has total assets exceeding $100,000,000.00;

and

(

b) three-tenths of one percent of the total assets of a company with total assets of

$100,000,000.00 or less.

Part XVIII - Subsidiaries

(1) For the purposes of subsection (2) of

Section 51 of the Act, a licensed provincial

company may establish or acquire as a subsidiary or associated company any of the

following types of companies:

(

a) data processing or information management company;

(

b) factoring company;

(

c) financial leasing company;

(

d) foreign financial institution;

(

e) investment counselling company;

(

f) mutual fund distribution company;

(

g) portfolio management company;

(

h) real property brokerage company;

(

i) real property company;

(

j) management service company;

(

k) insurance company or insurance brokerage company;

(

l) securities dealer company;

(

m) bank;

(

n) trust company; and

(

o) loan company.

(2) With the prior approval of the Superintendent and subject to such terms and

conditions as the Superintendent may impose, a licensed provincial company may

establish or acquire as a subsidiary or associated company, in addition to those set

out in subsection (1), any company carrying on any other business activity

reasonably ancillary to the business of the company.

subsidiary by a licensed provincial company under subsection (1) of

Section 116 are

as set out in this Section.

(2) Before making an application to incorporate a proposed subsidiary, or seven days

before making an investment in the shares of a proposed subsidiary that is an

existing company or body corporate, a licensed company shall file with the

Superintendent

(

a) where it is investing in the shares of an existing company or body corporate, a

certified copy of the instrument of incorporation, by-laws and most recent

financial statements of the company or body corporate; and

(

b) an undertaking that the licensed provincial company

(

i) will ensure that the proposed subsidiary engages only in business

activities related to the purposes for which it is incorporated or acquired

(ii) will ensure that the proposed subsidiary makes only investments that

satisfy the terms, conditions and restrictions that are applicable to

investments made by the licensed provincial company,

(iii) will provide to the Superintendent copies of the financial statements of

the proposed subsidiary and such other information concerning its

affairs as the Superintendent may from time to time request, and permit

the Superintendent or a person appointed by the Superintendent to visit

the head office and other offices of the subsidiary at any time and

examine its books, vouchers, securities and documents,

(iv) will notify the Superintendent forthwith of its disposition of any shares

of the proposed subsidiary,

(

v) will not dispose of any shares of the proposed subsidiary unless, after

disposition,

(

A) it will control the subsidiary, or

(

B) it will hold not more than ten percent of any class of shares with

voting rights,

(vi) will not permit the proposed subsidiary to amalgamate with another

company or body corporate without giving the Superintendent at least

three days notice of the proposed amalgamation and obtaining the

Superintendent’s approval, and

(vii) will ensure that the subsidiary does not acquire or hold more than ten

percent of any class of shares of any other body corporate with share

capital, or of the equity in a body corporate without share capital.

subsidiary by a licensed provincial company under subsection (2) of

Section 116 are

as set out in this Section.

(2) Before making an application to incorporate a proposed subsidiary, or seven days

before making an investment in the shares of a proposed subsidiary that is an

existing company, a licensed provincial company shall file with the Superintendent

(

a) where it is investing in the shares of an existing body corporate, a certified

copy of the instrument of incorporation, by-laws and most recent financial

statements of the body corporate; and

(

b) an undertaking that the licensed provincial company

(

i) will ensure that the proposed subsidiary engages only in business

activities related to the purposes for which it is incorporated or acquired

(ii) will ensure that the proposed subsidiary makes only investments that

satisfy the terms, conditions and restrictions that are applicable to

investments made by the licensed company,

(iii) will provide to the Superintendent copies of the financial statements of

the proposed subsidiary and such other information concerning its

affairs as the Superintendent may from time to time request, and permit

the Superintendent or person appointed by the Superintendent to visit

the head office and other offices of the subsidiary at any time and

examine its books, vouchers, securities and documents,

(iv) will ensure that the proposed subsidiary does not carry on

(

A) the business of a company or body corporate that is referred to in

subsection (1) of

Section 116, or

(

B) a business activity that is not reasonably ancillary to the business

of the licensed provincial company,

(

v) will notify the Superintendent forthwith of its disposition of any shares

of the proposed subsidiary,

(vi) will not dispose of any shares of the proposed subsidiary unless, after

the disposition,

(

A) it will control the subsidiary, or

(

B) it will hold not more than ten percent of any class of shares with

voting rights,

(vii) will not permit the proposed subsidiary to amalgamate with another

company or body corporate without giving the Superintendent at least

three days notice of the proposed amalgamation and obtaining the

Superintendent’s approval, and

(viii) will ensure that the subsidiary does not acquire or hold more than ten

percent of any class of shares of any other body corporate with share

capital, or of the equity in a body corporate without share capital.

(1) Every licensed provincial company that has established or acquired a subsidiary

under

Section 116 shall prepare a report under this

Section quarterly as of the last

day of March, June, September and December of each year, and shall file the report

with the Superintendent within thirty days after the end of the period to which it

relates.

(2) A report under subsection (1) shall set out for each subsidiary of the licensed

provincial company the amount and the form of the investment by the company in

the subsidiary and the amount of any guarantees of the liabilities of the subsidiary

given by the company.

(3) In subsection (2), the forms by which a licensed provincial company makes an

investment in a subsidiary include shares, debentures, loans and advances.

Part XIX [- Duties of Audit Committee and Investment Committee]

Duties of an audit committee

120 For the purposes of

Section 111 of the Act, the duties of an audit committee are as set out

in subsection (2) of

Section 121.

(1) In this Section, “audited financial statements” means the audited annual financial

statements to be placed before the shareholders of a company, including the notes to

the financial statements and the auditor’s report.

(2) The duties of an audit committee are to

(

a) review the reasonableness and significance of the financial position and

reported results in the audited financial statements of the company for the

purpose of making a report under subsection (5) of

Section 119 of the Act;

(

b) review the accounting principles and practices followed by the company

during the fiscal year of the financial statements reviewed under clause (a),

and all significant changes from the principles and practices followed during

the preceding fiscal year;

(

c) review the audited financial statements of the company’s subsidiaries, if any;

(

d) review every financial report that requires the approval of the board of

directors of the company prior to being submitted to a regulatory body;

(

e) discuss with the auditor the audit findings, any restrictions on the scope of the

auditor’s work and any problems that the auditor experienced in performing

the audit;

(

f) review the nature and extent of the auditor’s evaluation of the internal control

systems of the company;

(

g) review the recommendations made by the auditor to the management of the

company and the response made by management to the recommendations;

(

h) review the organization and independence of the internal auditors of the

company, including the internal auditors’ goals and work plans and any

problems that the internal auditors experienced in performing the audit;

(

i) review the recommendations that the internal auditors consider significant

respecting the improvement of accounting and internal control practices made

by the internal auditors to the management of the company and the response

made by management to the recommendations;

(

j) monitor the adherence by the directors, officers and employees of the

company to the code of conduct, if any, of the company;

(

k) enquire into all alleged contraventions of the code of conduct of the company

and into all circumstances that the committee considers might indicate that the

company or any of its directors, officers or employees may have contravened

the Act, the Securities Act, the Income Tax Act (Canada) or the regulations

made under those Acts;

(

l) review the adequacy of the company’s complement of employees to perform

its accounting and financial responsibilities;

(

m) enquire into any change in circumstances of the company that might

reasonably be expected to materially and adversely affect the financial

position of the company;

(

n) report and make such recommendations to the board of directors of the

company arising from its duties under clauses (

b) to (

m) as the committee

considers appropriate in the circumstances; and

(

o) report to the board of directors of the company any conflict between the

auditor and the management of the company that the committee has been

unable to resolve within a reasonable period of time.

Duties of an investment committee

(1) For the purposes of

Section 111 of the Act, the duties of an investment committee

are as set out in subsection (2) of

Section 123.

(2) Any report or recommendation made by an investment committee under

Section

123 is made to the board of directors of the company.

(1) In this Section, “investment practices” means the guidelines established for making

specified classes of investments and the investment decisions made in relation to the

guidelines, including investment decisions respecting mortgage loans, acquisition,

development and construction loans, personal loans, commercial loans, leasing

loans, marketable securities, other financial instruments, real estate and other fixed

assets.

(2) The duties of an investment committee are to

(

a) monitor the investment practices of the company to ensure that the company

is adhering to prudent investment standards, and report its findings thereon;

(

b) monitor and recommend procedures to be used by the company to monitor the

investment practices of every subsidiary of the company and every joint

venture in which the company is a participant to ensure that they are adhering

to prudent investment standards;

(

c) recommend an investment policy for the company that specifies the

proportion of the assets of the company that shall be allocated to specified

classes of investments, and recommend procedures for implementing the

policy;

(

d) recommend such changes to the investment policy of the company as the

committee from time to time considers necessary to meet changes in the

investment climate;

(

e) recommend the duties and powers of investment subcommittees, if any, and

officers and employees of the company to determine and implement the

investment policy of the company for specific classes of investments;

(

f) review and report on the investment policy determined by, and the investment

decisions made by investment subcommittees, officers and employees of the

company, and on the competence demonstrated by the subcommittees,

officers and employees;

(

g) recommend the duties and powers to be given to any investment counsellor or

other professional advisor retained by the company in connection with the

investment policy of the company, and monitor the decisions of the counsellor

or advisor to ensure that they are consistent with the investment policy of the

company;

(

h) review every valuation performed under clause 41(5)(

b) or subsection (6) of

Section 41

(

i) to ensure that it was performed by a valuator who, in the opinion of the

committee, has a demonstrated ability to evaluate investments with

independence and proficiency, and

(ii) by examining the valuation method used, to ensure that the valuation is

based upon sufficiently current information;

(

i) report every deviation from the investment policy of the company at the first

meeting of the board of directors after the committee becomes aware of the

deviation;

(

j) review all management reports concerning compliance by the company and its

directors, officers and employees with the Act and regulations; and

(

k) monitor the investment practices of the company to ensure that the

investment limits established do not exceed the limits required under the Act

and regulations, and report its findings thereon.

Part XX - Networking

(1) For the purposes of this Section, “retail” includes, without limiting its general

meaning, solicit, refer and sell.

(2) No licensed company shall retail insurance products in the Province.

(3) Subsection (2) shall not apply to

(

a) creditors group life and accident and sickness insurance; and

(

b) insurance products that are marketed, without any personal contact, to the

general public or to a select group.

Part XXI [- Forms]

Schedule 1 - Fees

[repealed]

________________________________________________________________

Form 1 - Application for the Issue of Letters Patent to Incorporate a Trust

or Loan Company

Trust and Loan Companies Act

Part I - General Information

1. Proposed name of the company:

2. Additional business name or style, if any, under which the company is to be

registered:

3. Address of the proposed head office:

4. Address of the proposed principal place of business in Nova Scotia:

5. Name, address and telephone number of each applicant:

Part II - Proposed Plan of Operations

6. The applicants shall prepare and attach a brief containing the information specified in this

Part.

Information about the proposed company

7. The brief shall include a description of

(

i) the proposed authorized capital of the company, the stated value thereof,

the amount to be subscribed and paid up and whether the subscription is

clear from all liability on the part of any subscriber,

(ii) the proposed plan of operations for the company, including a detailed

financial projection for the first five years’ operations, showing pro forma

balance sheets and income statements for the respective years and

assumptions,

(iii) the geographical area to be served by the company, the services to be

provided and the perceived public benefits and advantages to be offered,

and

(iv) proposed management personnel or proposals about securing

management personnel.

Information about the proposed major shareholders, directors and officers

8. The brief shall include

(

i) a personal questionnaire in Form 4 to the regulations under the Trust and

Loan Companies Act completed by each individual who is being

proposed as

(

A) a director of the company,

(

B) an officer of the company, and

(

C) a beneficial owner of ten percent or more of any class of shares of

the company, and

(ii) where a body corporate is proposed as beneficial owner of ten percent or

more of any class of shares of the company,

(

A) the name, address, date of birth, country of permanent residence,

educational qualifications, occupation and business experience of

each individual who beneficially owns ten percent or more of any

class of shares of the company, and a list of each individual’s

shareholdings by class of share, and

(

B) the most recent audited financial statements of the body corporate.

Information about the applicants

9. The brief shall include

(

i) a statement of the name and address of each applicant, the amount of

capital that each applicant proposes to contribute to the company and, for

an applicant who is an individual, the applicant’s date of birth and

occupation,

(ii) for each applicant who is proposed as beneficial owner of ten percent or

more of any class of shares of the company with voting rights,

(

A) a statement of net worth,

(

B) a letter of reference from the applicant’s bank, and

(

C) where the applicant is a body corporate, details of the corporate

structure and financial operations of the body corporate, and

(iii) a statement of consent by each applicant stating that the Superintendent

may make, at the Superintendent’s discretion, any enquiries or obtain any

information that the Superintendent deems necessary to evaluate this

brief.

Part III - Checklist of Enclosures to This Application

10. The applicants shall enclose with this application

(

i) the prescribed tax for filing and processing an application, and

(ii) evidence that the required amount of capital will be subscribed for in

good faith.

Part IV - Certification

11. The undersigned applicants hereby certify that the information given in this application and

any additional information that may be provided as requested by the Superintendent in

connection with this application is true and complete in every respect.

Dated this ______ day of _______________, _________.

Signature(

s) of witnesses: Signature(

s) of applicant(s)

(including corporate seal where appropriate):

________________________________________________________________

Form 2 - Application for Licence, Change of Licence, Amendment of Terms,

Conditions and Restrictions of Licence and the Issue of Supplementary Letters Patent

Trust and Loan Companies Act

Part I - General Information

1. Name of the company:

2. Additional business name or style, if any, under which the company is, or is to be,

registered:

3. Address of the head office:

4. Address of the principal place of business in Nova Scotia:

5. Name and address(es) of the chief agent or officer of the company in Nova Scotia:

(

i) Name in full:

(ii) Business address:

(iii) Residence address:

6. Indicate the type of application being made by checking the applicable items from

paragraphs 7 to 11.

7. _______ Application for a licence as a loan company.

8. _______ Application for a licence as a trust company.

The company applies to act in a fiduciary capacity in respect of the following classes of

services:

9. Application for a change of licence

_______ from a licensed loan company to a trust company; or

_______ from a licensed trust company to a loan company.

10. Application to amend the terms, conditions and restrictions of the company’s existing

licence as follows:

11. _______ Application for the issuance of supplementary letters patent for the company.

Part II - Proposed Plan of Operation

12. Do not complete

Part II if you are filing this application at the same time as a Form 1

application to incorporate a loan or trust company.

13. The applicant shall prepare and attach a brief containing the information specified in this

Part.

Information about the applicant company

14. The brief shall include

(

i) details of the jurisdiction, date and method of incorporation of the

company, and where applicable, the date of any amalgamation involving

the company and the name of any amalgamated body corporate,

(ii) a description of the authorized capital, if any, of the company, the stated

value thereof, the issued capital and shall include a list of the

shareholders of the company,

(iii) details of the corporate structure and financial operations of the company

in the five years preceding the date of this application,

(iv) a description of the proposed plan of operations for the company,

including a detailed financial projection for the first five years’

operations, showing pro forma balance sheets and income statements for

the respective years and assumptions, and

(

v) a description of the geographical area to be served by the company, the

services to be provided and the perceived public benefits and advantages

to be offered.

15. Where the applicant is an extra-provincial company, the brief shall

(

i) where the company was incorporated within the year preceding this

application, include a copy of the application by the company for

incorporation and any application for licensing as a loan or trust company

including supporting materials, in the jurisdiction of its incorporation,

(ii) include a certified copy of the incorporating instruments, including

amending instruments of the company, the by-laws and the most recent

annual report that the company has filed with the governmental authority

regulating loan and trust companies in the jurisdiction of its

incorporation,

(iii) include proof that the company is licensed as a loan or trust company in

the jurisdiction of its incorporation,

(iv) provide the proposed plan of operations described in subparagraph (iv) of

paragraph 14 both for the company as a whole and for the operations of

the company in Nova Scotia, and

(

v) include a power of attorney in Form 3 to the regulations under the Trust

and Loan Companies Act.

Information about the major shareholders, directors and officers

16. The brief shall include,

(

i) a personal questionnaire in Form 4 to the regulations under the Trust and

Loan Companies Act completed by each individual who is

(

A) a director of the company,

(

B) an officer of the company, or

(

C) a beneficial owner of ten percent or more of any class of shares of

the company, and

(ii) where a body corporate is the beneficial owner of ten percent or more of

any class of shares of the company,

(

A) details of the name, address, date of birth, country of permanent

residence, educational qualifications, occupation and business

experience of each individual who beneficially owns ten percent or

more of any class of shares of the body corporate, and a list of each

individual’s shareholdings by class of share, and

(

B) the most recent audited financial statements of the body corporate,

(iii) for each director of the company and each shareholder that beneficially

owns ten percent or more of any class of shares of the company, a list of

every regulated financial institution of which the director or shareholder

is or has been in the past five years a director or a beneficial owner of ten

percent or more of any class of shares with voting rights,

(iv) details of the name, address, date of birth, educational and professional

qualifications and business experience of each officer and senior manager

of the company, and

(

v) a statement of consent by each director of the company stating that the

Superintendent may make, at the Superintendent’s discretion, any

enquiries or obtain any information that the Superintendent deems

necessary to evaluate this brief or verify the accuracy of the information

in this application.

Part III - Checklist of Enclosures to This Application

17. The applicant shall enclose with this application

(

i) the prescribed tax for filing and processing an application,

(ii) the evidence required under subsection (5) of

Section 212 of the Act

respecting deposit insurance,

(iii) a certified copy of the resolution of the board of directors authorizing this

application, and

(iv) where the applicant is an extra-provincial company, the undertaking

required under subsections (9) and (10) of

Section 212 of the Act and the

certified copy of the resolution of the board of directors authorizing the

undertaking.

Part IV - Certification

18. The applicant or applicants certify that the information given in this application and any

additional information that may be provided as requested by the Superintendent in

connection with this application is true and complete in every respect.

Dated this ____ day of ______________, _______.

Signature(

s) of Witnesses: Signature(

s) of applicant(s) (including description of

the office of the signatories and the corporate seal

where appropriate):

________________________________________________________________

Form 3 - Power of Attorney for a Chief Agent

Trust and Loan Companies Act

Name of the company giving the power of attorney:

(“the company”)

Jurisdiction and instrument of incorporation of the company:

Name of the person receiving the power of attorney:

(“the chief agent”)

Address in Nova Scotia of the chief agent (full business address

including street number and municipality):

(“the chief agency”)

The company appoints _________________________________ (name in full of the chief

agent) as its chief agent and attorney under subsection (9) of

Section 212 of the Trust and Loan

Companies Act (“the Act”).

The company authorizes the chief agent to receive service of process on its behalf in all civil,

criminal or administrative proceedings against the company in Nova Scotia, and to receive from

the Superintendent of Trust and Loan Companies any notices or documents given to the

company under the Act and regulations. Receipt by the chief agent personally or at the chief

agency of service of process and of notices and documents is binding on the company.

(Insert additional powers being given to the chief agent, if any.)

Dated the ____ day of ______________, _______.

(Name of company)

Witnesses: By:

(President or Managing Director)

(Secretary)

(Corporate Seal)

________________________________________________________________

Form 4 - Personal Questionnaire for Major Shareholders, Directors and Officers

Trust and Loan Companies Act

Part I - General information

1. Name of the company or proposed company in connection with which this questionnaire is

being completed:

(“the company”)

2. This questionnaire is being completed by:

Name

(surname) (given names)

Date of birth Citizenship

(day, month, year)

3. Indicate by checking the applicable items and filling in the information required:

(i) ___ a shareholder or proposed shareholder with beneficial ownership of

ten percent or more of any class of shares of the company,

indicate the class of shares and the percentage of shares that you

beneficially own:

(ii) ___ a director or proposed director of the company,

(iii) ___ an officer or proposed officer of the company,

indicate your position:

4. The date on which you became a

(

i) shareholder ____________________________

(ii) director _______________________________

(iii) officer ________________________________

5. Your residence address and telephone number in Canada:

6. Your residence address and telephone number outside Canada, where applicable:

7. Your business address and telephone number:

8. Every person shall complete the questionnaire by answering the questions indicated

and providing or attaching the information specified in the Parts below.

Part II - Personal History

9. List your residence addresses during the ten years preceding the date of this questionnaire,

leaving no period unaccounted for:

10. Give details of your education and your professional qualifications and affiliations, if any,

including relevant dates:

11. Give details of your employment history during the ten years preceding the date of this

questionnaire, leaving no period unaccounted for, and including for each employment

(

i) the title of your position,

(ii) the dates of employment,

(iii) the name and address of your employer, and

(iv) the name, position and telephone number of a refere