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Bill C-8

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``finance entity'' « entité s'occupant de finance- ment »	``finance entity'' means a finance entity as defined in the regulations.
``financial leasing entity'' « entité s'occupant de crédit-bail »	``financial leasing entity'' means an entity
	(a) whose activities are limited to the financial leasing of personal property and such related activities as are prescribed and whose activities conform to such restrictions and limitations thereon as are prescribed; and
	(b) that, in conducting the activities referred to in paragraph (a) in Canada, does not
	(i) direct its customers or potential customers to particular dealers in the leased property or the property to be leased,
	(ii) enter into lease agreements with persons in respect of any motor vehicle having a gross vehicle weight, as that expression is defined by the regulations, of less than twenty-one tonnes, or
	(iii) enter into lease agreements with natural persons in respect of personal household property, as that expression is defined by the regulations.
``loan'' « prêt » ou « emprunt »	``loan'' includes an acceptance, endorsement or other guarantee, a deposit, a financial lease, a conditional sales contract, a repurchase agreement and any other similar arrangement for obtaining funds or credit but does not include investments in securities.
``motor vehicle'' « véhicule à moteur »	``motor vehicle'' means a motorized vehicle designed to be used primarily on a public highway for the transportation of persons or things, but does not include
	(a) a fire-engine, bus, ambulance or utility truck; or
	(b) any other special purpose motorized vehicle that contains significant special features that make it suitable for a specific purpose.
``mutual fund distribution entity'' « courtier de fonds mutuels »	``mutual fund distribution entity'' means an entity whose principal activity is acting as a selling agent of units, shares or other interests in a mutual fund and acting as a collecting agent in the collection of payments for any such interests if
	(a) the proceeds of the sales of any such interests, less any sales commissions and service fees, are paid to the mutual fund; and
	(b) the existence of a sales commission and service fee in respect of the sale of any such interest is disclosed to the purchaser of the interest before the purchase of the interest.
``mutual fund entity'' « entité s'occupant de fonds mutuels »	``mutual fund entity'' means an entity
	(a) whose activities are limited to the investing of the funds of the entity so as to provide investment diversification and professional investment management to the holders of its securities; and
	(b) whose securities entitle their holders to receive, on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in a part of its net assets, including a separate fund or trust account of the entity.
``participa- ting share'' « action partici- pante »	``participating share'' means a share of a body corporate that carries the right to participate in the earnings of the body corporate to an unlimited degree and to participate in a distribution of the remaining property of the body corporate on dissolution.
``permitted entity'' « entité admissible »	``permitted entity'' means an entity in which an association is permitted to acquire a substantial investment under section 390.
``prescribed subsidiary'' « filiale réglementai- re »	``prescribed subsidiary'' means a subsidiary that is one of a prescribed class of subsidiaries.
``real property brokerage entity'' « courtier immobilier »	``real property brokerage entity'' means an entity that is primarily engaged in
	(a) acting as an agent for vendors, purchasers, mortgagors, mortgagees, lessors or lessees of real property; and
	(b) the provision of consulting or appraisal services in respect of real property.
``specialized financing entity'' « entité s'occupant de financement spécial »	``specialized financing entity'' means a specialized financing entity as defined in the regulations.
Members of an association's group	(2) For the purpose of this Part, a member of an association's group is any of the following:
	(a) an entity referred to in paragraph 390(1)(a) that controls the association;
	(b) a subsidiary of the association or of an entity referred to in paragraph 390(1)(a) that controls the association;
	(c) an entity in which the association, or an entity referred to in paragraph 390(1)(a) that controls the association, has a substantial investment; or
	(d) a prescribed entity in relation to the association.
Non-applicati on of Part	(3) This Part does not apply in respect of
	(a) the holding of a security interest in real property, unless the security interest is prescribed under paragraph 403(a) to be an interest in real property; or
	(b) the holding of a security interest in securities of an entity.
	General Constraints on Investments
Investment standards	387. The directors of an association shall establish and the association shall adhere to investment and lending policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans to avoid undue risk of loss and obtain a reasonable return.
Restriction on control and substantial investments	388. (1) Subject to subsections (2) to (4), no association shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.
Exception: indirect investments	(2) An association may, subject to Part XII, acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of
	(a) an acquisition of control of an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that controls or has a substantial investment in the entity; or
	(b) an acquisition of shares or ownership interests in the entity by
	(i) an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that is controlled by the association, or
	(ii) an entity controlled by an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that is controlled by the association.
Exception: temporary investments, realizations and loan workouts	(3) An association may, subject to Part XII, acquire control of, or acquire or increase a substantial investment in, an entity by way of
	(a) a temporary investment permitted by section 393;
	(b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 394; or
	(c) a realization of security permitted by section 395.
Exception: specialized financing regulations	(4) A retail association may, subject to Part XII, acquire control of, or hold, acquire or increase a substantial investment in, an entity other than a permitted entity if it does so in accordance with regulations made under paragraph 389(d) concerning specialized financing.
Exception: uncontrolled event	(5) An association is deemed not to contravene subsection (1) if the association acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the association.
Regulations re limits	389. The Governor in Council may make regulations
	(a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Part;
	(b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by an association and its prescribed subsidiaries to or in a person and any persons connected with that person;
	(c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and
	(d) concerning specialized financing for the purposes of subsection 388(4).
	Subsidiaries and Equity Investments
Permitted investments	390. (1) Subject to subsections (4) to (6) and Part XII, an association may acquire control of, or acquire or increase a substantial investment in,
	(a) an association;
	(b) a bank or a bank holding company as that expression is defined in section 2 of the Bank Act;
	(c) a body corporate to which the Trust and Loan Companies Act applies;
	(d) an insurance company, a fraternal benefit society or an insurance holding company incorporated or formed by or under the Insurance Companies Act;
	(e) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;
	(f) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;
	(g) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or
	(h) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.
Permitted investments	(2) Subject to subsections (3) to (6) and Part XII, an association may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (h), whose business is limited to one or more of the following:
	(a) engaging in any financial service activity or in any other activity that a retail association is permitted to engage in under subsection 375(2) or section 376 or 377;
	(b) acquiring or holding shares of, or ownership interests in, entities in which an association is permitted under this Part to hold or acquire;
	(c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the association or any member of the association's group:
	(i) the association,
	(ii) any member of the association'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 retail association 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 association or any member of the association's group, or
	(ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;
	(e) engaging in the activities referred to in the definition ``mutual fund entity'', ``mutual fund distribution entity'' or ``real property brokerage entity'' in subsection 386(1); and
	(f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.
Restriction	(3) An association may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include
	(a) activities that an association is not permitted to engage in under any of sections 378, 382 and 382.1;
	(b) dealing in securities, except as may be permitted under paragraph (2)(e) or as may be permitted either to an association under paragraph 376(1)(f) or to a retail association under subparagraph 376(1)(i)(ii);
	(c) activities that an association is not permitted to engage in under section 381 if the entity engages in the activities of a finance entity or of any other entity as may be prescribed;
	(d) acquiring control of or acquiring or holding a substantial investment in another entity unless
	(i) in the case of an entity that is controlled by the association, the association itself would be permitted under this Part to acquire a substantial investment in the other entity, or
	(ii) in the case of an entity that is not controlled by the association, the association itself would be permitted to acquire a substantial investment in the other entity under subsection (1) or (2) or 388(2), paragraph 388(3)(b) or (c) or subsection 388(4); or
	(e) any prescribed activity.
Control	(4) Subject to subsection (8) and the regulations, an association may not acquire control of, or acquire or increase a substantial investment in,
	(a) an entity referred to in any of paragraphs (1)(a) to (h), unless
	(i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or
	(ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment;
	(b) an entity whose business includes one or more of the activities referred to in paragraph (2)(a) and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a finance entity, a factoring entity and a financial leasing entity, unless
	(i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or
	(ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment; or

Bill C-8

General Constraints on Investments

Subsidiaries and Equity Investments