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Bill C-38

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Exceptions for Foreign Financial Institutions

Foreign insurance company

515. Paragraphs 508(1)(a) to (c) and subsection 508(2) do not apply to a foreign insurance company in relation to its insurance business in Canada.

Business in Canada of authorized foreign bank

515.1 Paragraphs 508(1)(a) to (c) and subsection 508(2) do not apply in respect of the business in Canada of an authorized foreign bank.

Real property holding and management

515.2 Paragraphs 508(1)(a) and (b) do not apply in respect of holding, managing and other dealing with real property in Canada by a foreign bank or an entity associated with a foreign bank.

Exceptions relative to Federal Financial Institutions

Control or substantial investment

516. (1) Notwithstanding paragraph 508(1)(d) and section 518, a foreign bank, or an entity associated with a foreign bank, other than one that holds control of, or a substantial investment in, a Canadian entity under subsection 513(1) or that carries on businesses or activities under subsection 513(2), may acquire or hold control of, or a substantial investment in,

    (a) a Canadian entity referred to in any of paragraphs 468(1)(a) to (f); and

    (b) any other Canadian entity, by way of an acquisition of control of a Canadian entity referred to in paragraph (a) that has control of, or a substantial investment in, the Canadian entity.

Substantial investment

(2) Notwithstanding subsection (1) and paragraph 508(1)(d), a foreign bank, or an entity associated with a foreign bank, that holds control of, or a substantial investment in, a Canadian entity under subsection 513(1) or that carries on businesses or activities under subsection 513(2) may acquire or hold a substantial investment in a Canadian entity referred to in any of paragraphs 468(1)(a) to (f) so long as the foreign bank and any entity associated with the foreign bank meet the conditions set out in subsections 513(4) and (5).

Activities in Canada of certain entities

(3) Paragraphs 508(1)(a) to (c) do not apply to a Canadian entity referred to in paragraph (1)(a) or (b) or subsection (2).

Guarantee and acceptance of securities and bills

(4) Subsection 508(2) does not apply in respect of the guarantee or acceptance by a foreign bank of securities or bills of exchange or depository bills that are issued by

    (a) a bank that is a subsidiary of the foreign bank or of an entity associated with the foreign bank;

    (b) a Canadian entity in which a bank that is a subsidiary of the foreign bank, or of an entity associated with the foreign bank, holds a substantial investment; or

    (c) a Canadian entity controlled by a bank that is a subsidiary of the foreign bank or of an entity associated with the foreign bank.

Designation of Foreign Banks

Power of Minister

517. (1) The Minister may, by order, designate a foreign bank

    (a) if the Minister is of the opinion, after consulting with the Superintendent,

      (i) that the foreign bank provides services outside Canada, a significant portion of which are services that would be permitted by this Act if they were provided by a bank in Canada, and that the foreign bank is regulated as a bank in the jurisdiction under whose laws it was incorporated or in any jurisdiction in which it carries on business, or

      (ii) that the business of taking deposits outside Canada constitutes a significant portion of the foreign bank's business and that the foreign bank is, with respect to its provision of financial services, regulated in the jurisdiction under whose laws it was incorporated or in any jurisdiction in which it carries on business;

    (b) if the Minister is of the opinion that the foreign bank is an entity associated with a foreign bank to which paragraph (a) applies; or

    (c) after taking into consideration any other aspect of its business or regulation or that of any entity associated with the foreign bank.

Deeming

(2) A foreign bank that was designated under subsection 521(1.06) before the repeal of that subsection and whose designation has not been revoked is deemed to have been designated under subsection (1).

Effect of order

(3) No foreign bank that has been designated under subsection (1), and no other foreign bank that is an entity associated with the foreign bank, may be the subject of an order under subsection 507.1(1).

Foreign Financial Branches

Foreign securities dealers and cooperatives

517.1 (1) Notwithstanding paragraphs 508(1)(a) and (b), a foreign bank designated under section 517 or an entity associated with such a foreign bank may, subject to paragraph 518.2(1)(f),

    (a) engage in a business or activity in Canada that a Canadian entity referred to in paragraph 468(1)(i) may engage in, so long as

      (i) that business or activity is carried on in accordance with provincial laws relating to securities dealing, and

      (ii) the foreign bank or entity associated with the foreign bank is a foreign securities dealer; or

    (b) engage in a business or activity in Canada that a Canadian entity referred to in paragraph 468(1)(h) may engage in, so long as

      (i) that business or activity is carried on in accordance with provincial laws relating to cooperative credit societies, and

      (ii) the foreign bank or entity associated with the foreign bank is a foreign cooperative credit society.

Automated services

(2) Notwithstanding paragraph 508(1)(c), a foreign bank, or an entity associated with a foreign bank, that has received the approval of the Minister under paragraph 518.2(1)(f) may

    (a) if it is a foreign securities dealer that has also received the approval of the Minister under paragraph 518.2(1)(i), engage in the activities referred to in paragraph 508(1)(c) so long as they relate to its business of dealing in securities carried on by it in accordance with provincial laws relating to securities dealing; and

    (b) if it is a foreign cooperative credit society, engage in the activities referred to in paragraph 508(1)(c) so long as they relate to its business as a cooperative credit society carried on by it in accordance with provincial laws relating to cooperative credit societies.

Guarantee and acceptance of securities and bills

(3) Notwithstanding subsection 508(2), a foreign bank, or an entity associated with a foreign bank, that has received the approval of the Minister under paragraph 518.2(1)(f) may,

    (a) if it is a foreign securities dealer, guarantee any securities or accept any bills of exchange or depository bills in relation to its business of dealing in securities carried on by it in accordance with provincial laws relating to securities dealing; and

    (b) if it is a foreign cooperative credit society, guarantee any securities or accept any bills of exchange or depository bills in relation to its business as a cooperative credit society carried on by it in accordance with provincial laws relating to cooperative credit societies.

Foreign Bank Conglomerates Offering Financial Services

Acquisition of Canadian entity

518. (1) Notwithstanding paragraph 508(1)(d), a foreign bank designated under section 517 or an entity associated with such a foreign bank may, subject to subsection 516(1) and section 518.2,

    (a) acquire or hold control of a Canadian entity referred to in any of paragraphs 468(1)(g) to (i);

    (b) acquire or hold control of a Canadian entity referred to in subsection (5) that is a Canadian financial entity whose business does not include any business or activity referred to in subsection (6); or

    (c) become a major owner of a Canadian entity referred to in paragraph (a) or (b).

Foreign banks with branches, Canadian financial institutions and entities

(2) Notwithstanding paragraph 508(1)(d), where a foreign bank designated under section 517, or an entity associated with such a foreign bank,

    (a) is an authorized foreign bank,

    (b) is a foreign insurance company,

    (c) is a foreign securities dealer or foreign cooperative credit society that has received the approval of the Minister under paragraph 518.2(1)(f),

    (d) controls a Canadian entity referred to in any of paragraphs 468(1)(a) to (i), or a Canadian entity referred to in any of paragraphs (5)(a) to (f) that is a Canadian financial entity, or

    (e) is a major owner of a Canadian entity referred to in any of paragraphs 468(1)(a) to (i), or a Canadian entity referred to in any of paragraphs (5)(a) to (f) that is a Canadian financial entity,

the foreign bank and any entity associated with the foreign bank may, subject to subsection 516(1) and section 518.2, acquire or hold control of, or a substantial investment in, a Canadian entity referred to in subsection (3) or acquire or hold control of, or a substantial investment in, a Canadian entity in the way described in paragraph (4)(a), (b) or (c).

Permitted investments

(3) Subsection (2) applies in respect of the acquisition or holding of the control of, or a substantial investment in,

    (a) a Canadian entity referred to in subsection (5) whose business does not include any business or activity referred to in subsection (6); or

    (b) a Canadian entity referred to in subsection (18) or in any of paragraphs 468(1)(g) to (i).

Other permitted investments

(4) Subsection (2) applies in respect of the acquisition or holding of the control of, or a substantial investment in, a Canadian entity by way of

    (a) an indirect investment permitted by subsection (8);

    (b) a temporary investment permitted by any of subsections (9) to (13); or

    (c) a realization of security or a loan workout permitted by any of subsections (14) to (16).

Financial and related investments

(5) A foreign bank, or an entity associated with a foreign bank, that is referred to in subsection (1) or (2) may, subject to subsection (6) and section 518.2, acquire or hold control of, or a substantial investment in, a Canadian entity - other than an entity described in paragraphs 468(1)(a) to (i) - whose business is limited to one or more of the following:

    (a) engaging in any financial service activity that a bank is permitted to engage in under any of paragraphs 409(2)(a) to (d), in any activity engaged in in accordance with regulations made under paragraph 519(a) concerning specialized financing, or in any other activity that a bank is permitted to engage in under section 410 or 411;

    (b) acquiring or holding shares of, or ownership interests in, entities that a foreign bank, or an entity associated with a foreign bank, is permitted to acquire or hold under this section, other than subsection (17), or under subsection 516(1), including shares or ownership interests acquired or held in accordance with the regulations made under paragraph 519(a) concerning specialized financing;

    (c) engaging in the provision of any services exclusively to any or all of the following, so long as the Canadian entity is providing those services to the foreign bank or any member of the foreign bank's group, namely,

      (i) the foreign bank,

      (ii) any member of the foreign bank's group,

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

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

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

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

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

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

    (e) engaging in the activities referred to in the definition ``mutual fund entity'', ``mutual fund distribution entity'' or ``real property brokerage entity'' in subsection 507(1); and

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

Additional restriction

(6) A foreign bank, or an entity associated with a foreign bank, that is referred to in subsection (1) or (2) may not acquire or hold control of, or a substantial investment in, or become or be a major owner of, a Canadian entity whose business includes any activity referred to in any of paragraphs (5)(a) to (e) if the entity engages in a business referred to in paragraph 514(1)(a) or (b) or if the activities of the Canadian entity include

    (a) activities that a bank is not permitted to engage in under section 412, 415, 417 or 418;

    (b) activities that a bank is not permitted to engage in under section 416, if the Canadian entity engages in the activities of a finance entity or of any other entity as may be prescribed;

    (c) acquiring or holding control of, or a substantial investment in, a Canadian entity that is referred to in subsection (18), or a Canadian entity that a foreign bank is not permitted to control or in which a foreign bank is not permitted to hold a substantial investment under this section or subsection 516(1), unless the acquisition or holding

      (i) is permitted under any of subsections (14) to (16),

      (ii) is in accordance with the regulations made under paragraph 519(a) concerning specialized financing, or

      (iii) is permitted by the regulations made under paragraph 519(e); or

    (d) any prescribed activity.

Application of regulations

(7) Any regulations made for the purposes of sections 409 to 411 apply for the purposes of paragraph (5)(a) and subsection 518.2(1) unless otherwise provided in the regulations.

Indirect investments

(8) Notwithstanding paragraph 508(1)(d), a foreign bank, or an entity associated with a foreign bank, that is referred to in subsection (2) may acquire or hold control of, or a substantial investment in, a Canadian entity - other than a Canadian entity that a foreign bank is permitted to control or in which a foreign bank is permitted to hold a substantial investment under this section or subsection 516(1) - by way of

    (a) an acquisition or holding of the control of a Canadian entity referred to in any of paragraphs 468(1)(a) to (i), or of a prescribed Canadian entity, that has control of or a substantial investment in the Canadian entity; or

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

      (i) a Canadian entity referred to in any of paragraphs 468(1)(a) to (i), or a prescribed Canadian entity, that is controlled by the foreign bank or the entity associated with a foreign bank, or

      (ii) a Canadian entity controlled by a Canadian entity referred to in subparagraph (i).

Temporary investments

(9) Notwithstanding paragraph 508(1)(d) and subject to subsections (10) to (13), a foreign bank, or an entity associated with a foreign bank, that is referred to in subsection (2) may - by way of temporary investment - acquire or hold control of, or a substantial investment in, a Canadian entity, but the foreign bank or entity shall do all things necessary to ensure that, within two years after acquiring the control or the substantial investment or within any other period that may be specified or approved by the Minister, it no longer controls or holds a substantial investment in the entity.

Extension

(10) On application by a foreign bank, or an entity associated with a foreign bank, the Minister may extend the period referred to in subsection (9) by any further period or periods.

Exception

(11) Where a foreign bank, or an entity associated with a foreign bank, that is referred to in subsection (2) acquires or holds - by way of temporary investment - control of, or a substantial investment in, a Canadian entity for which the approval of the Minister is required under this Part, the foreign bank or entity associated with a foreign bank shall, within 90 days after acquiring control or after acquiring the substantial investment,

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