Canada Pension Plan Investment Board Regulations (SOR/99-190)

Interpretation

1 The definitions in this section apply in these Regulations.

Act

Act means the Canada Pension Plan Investment Board Act. (Loi)

Canadian corporation

Canadian corporation means a body corporate incorporated or formed by or under an Act of Parliament or the legislature of a province. (société canadienne)

Canadian resource property

Canadian resource property has the same meaning as in paragraph (c) of the definition Canadian resource property in subsection 66(15) of the Income Tax Act. (avoir minier canadien)

child

child, in respect of a person, means

• (a) a natural or adopted child of the person or the child’s spouse; or

• (b) a natural or adopted child of the person’s spouse or the child’s spouse. (enfant)

debt obligation

debt obligation means a bond, debenture, note or other evidence of indebtedness of an entity. (titre de créance)

derivative

derivative means a financial instrument or agreement whose value is derived from or is based on an underlying asset or the relationship between two underlying assets, other than

• (a) a convertible security;

• (b) an asset-backed security;

• (c) a security of a mutual fund;

• (d) an index participation unit;

• (e) a security of a non-redeemable fund;

• (f) a government or corporate strip bond; or

• (g) a listed dividend share of a subdivided equity or fixed income security. (instrument dérivé)

entity

entity[Repealed, SOR/2010-284, s. 1]

financial institution

financial institution means

• (a) a bank;

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

• (c) a cooperative credit society to which the Cooperative Credit Associations Act applies;

• (d) an insurance company to which the Insurance Companies Act applies;

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

• (f) a cooperative credit society incorporated 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, including portfolio management and investment counselling; or

• (h) a foreign institution. (institution financière)

foreign institution

foreign institution means an entity that is

• (a) engaged in the business of banking, the trust, loan or insurance business, the business of a cooperative credit society or the business of dealing in securities or is engaged primarily in the business of providing financial services; and

• (b) incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province. (institution étrangère)

loan

loan includes a deposit, financial lease, conditional sales contract, repurchase agreement and any other similar arrangement for obtaining money or credit, but does not include investments in securities or the making of an acceptance, endorsement or other guarantee. (prêt)

market terms and conditions

market terms and conditions, in respect of a transaction, means terms and conditions, including those relating to price, rent or interest rate, that would apply to a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm’s length and acting prudently, knowledgeably and willingly. (conditions du marché)

person

person includes an entity. (personne)

public exchange

public exchange means a market for the trading of securities that is recognized by an appropriate governmental authority. (bourse)

real property

real property includes a leasehold interest in real property. (biens immeubles)

related party

related party means a person who is

• (a) a director, officer or employee of the Board,

• (b) a person responsible for holding or investing the assets of the Board, or any officer, director or employee of the person,

• (c) the spouse or a child of any person referred to in paragraph (a) or (b),

• (d) a corporation that is directly or indirectly controlled by a person referred to in any of paragraphs (a) to (c), or

• (e) an entity in which a person referred to in paragraph (a), (b) or (c) has a substantial investment,

It does not include Her Majesty in right of Canada or of a province, or an agency of either one, or a bank, trust company or other financial institution that holds the assets of the Board. (apparenté)

security

security means

• (a) in respect of a corporation, a share of any class of shares of the corporation or a debt obligation of the corporation, and includes a warrant of the corporation, but does not include a deposit with a financial institution or an instrument evidencing such a deposit; and

• (b) in respect of any other entity, any ownership interest in, or debt obligation of, the entity. (titre ou valeur mobilière)

transaction

transaction includes

• (a) a contract;

• (b) a guarantee;

• (c) an investment;

• (d) the taking of an assignment of, or otherwise acquiring, a loan made by a third party;

• (e) the taking of a security interest in securities; and

• (f) any modification, renewal or extension of a prior transaction. (transaction)

underlying asset

underlying asset means a financial instrument, security, commodity, currency, interest rate, foreign exchange rate, economic indicator, index, basket, agreement or benchmark or any other financial reference, interest or variable. (actif sous-jacent)

voting share

voting share means a share of any class of shares of a corporation that carries voting rights under all circumstances, by reason of an event that has occurred and is continuing or by reason of a condition that has been fulfilled. (action avec droit de vote)

• 2 (1) For the purposes of these Regulations,

  • (a) a person controls a corporation if securities of the corporation to which are attached more than 50 per cent of the votes that may be cast to elect the directors of the corporation are beneficially owned by the person and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the corporation;

  • (b) a person controls an unincorporated entity, other than a limited partnership, if more than 50 per cent of the ownership interests into which the unincorporated entity is divided are beneficially owned by the person and the person is able to direct the business and affairs of the unincorporated entity;

  • (c) the general partner of a limited partnership controls the limited partnership; and

  • (d) a trustee of a trust controls the trust.

• (2) For the purposes of these Regulations, a person who controls an entity is deemed to control any other entity that is controlled by the entity.

3 [Repealed, SOR/2012-296, s. 1]

4 For the purposes of these Regulations, an entity is affiliated with another entity if the entity is controlled by the other entity or if both entities are controlled by the same person.

5 For the purposes of these Regulations, a person has a substantial investment in

• (a) an unincorporated entity if the person or an entity controlled by the person beneficially owns more than 25 per cent of the ownership interests in the unincorporated entity; and

• (b) a corporation if

  • (i) the voting rights attached to voting shares of the corporation that are beneficially owned by the person, or by an entity controlled by the person, exceed 10 per cent of the voting rights attached to all of the outstanding voting shares of the corporation, or

  • (ii) shares of the corporation that are beneficially owned by the person, or by an entity controlled by the person, represent ownership of more than 25 per cent of the shareholders’ equity of the corporation.

6 For the purposes of these Regulations, a person is associated with

• (a) a corporation that the person controls and every affiliate of every such corporation;

• (b) a person who controls the person;

• (c) a partner who has a substantial investment in a partnership in which the person has a substantial investment;

• (d) a trust or estate in which the person has a substantial investment or for which the person serves as trustee or in a similar capacity to a trustee;

• (e) the spouse of the person; and

• (f) a brother, sister or child or other descendant of the person, or the spouse of any of them.

PART 1Investments

7 In selecting investments, the Board shall evaluate them having regard to the overall rate of return and risk of loss of the entire portfolio of investments held by the Board.

Statement of Investment Policies, Standards and Procedures

• 8 (1) A written statement of the investment policies, standards and procedures in respect of the Board’s portfolio of investments, established under section 35 of the Act, shall include

  • (a) categories of investments;

  • (b) the use of options, futures and other derivatives;

  • (c) diversification of the investment portfolio;

  • (d) asset mix and rate of return expectations;

  • (e) policies for the management of credit, market and other financial risks;

  • (f) liquidity of investments;

  • (g) the lending of cash or securities;

  • (h) the retention or delegation of voting rights acquired through investments;

  • (i) the method of, and basis for, the valuation of investments that are not regularly traded at a public exchange; and

  • (j) related-party transactions permitted under section 17 and the criteria used to establish whether a transaction is nominal.

  • (k) [Repealed, SOR/2001-522, s. 1]

• (2) The statement of investment policies, standards and procedures referred to in subsection (1) shall include a description of all factors that may affect the funding of the Canada Pension Plan and the ability of the Canada Pension Plan to meet its financial obligations and the relationship of those factors to those policies, standards and procedures.

• (3) The board of directors shall review and confirm or amend the statement at least once each financial year.

9 [Repealed, SOR/2005-150, s. 1]

10 [Repealed, SOR/2001-522, s. 2]

Quantitative Limits

• 11 (1) The Board shall not directly or indirectly invest more than 10 per cent of the total book value of the Board’s assets in the securities of

  • (a) any one person;

  • (b) two or more associated persons; or

  • (c) two or more affiliated corporations.

• (2) Subsection (1) does not apply in respect of investments in

  • (a) a subsidiary of the Board;

  • (b) securities issued or fully guaranteed by the Government of Canada, the government of a province, or an agency of either of them;

  • (c) a fund composed of mortgage-backed securities that are fully guaranteed by the Government of Canada, the government of a province, or an agency of either of them;

  • (d) a fund that replicates the composition of a widely recognized index of a broad class of securities traded on a public exchange; or

  • (e) a segregated fund or mutual or pooled fund that complies with the requirements applicable to a plan under the Pension Benefits Standards Regulations, 1985.

12 [Repealed, SOR/2012-296, s. 2]

• 13 (1) The Board shall not directly or indirectly invest in the securities of a corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation.

• (2) Subsection (1) does not apply in respect of investments in securities issued by a subsidiary of the Board.

14 [Repealed, SOR/2007-13, s. 1]

Related Party Transactions

15 For the purposes of sections 16 and 17

• (a) if a transaction is entered into by, or on behalf of, the Board with a person who the Board, or any person acting on the Board’s behalf, knows will become a related party to the Board, the person shall be considered to be a related party of the Board in respect of the transaction; and

• (b) the fulfilment of an obligation under the terms of any transaction, including the payment of interest on a loan or deposit, is part of the transaction and not a separate transaction.

• 16 (1) Subject to sections 17 and 18, the Board shall not directly or indirectly enter into a transaction with a related party.

• (2) Subject to sections 17 and 18, within the 12-month period after the day on which a person ceases to be a related party, the Board shall not directly or indirectly enter into a transaction with that person.

• 17 (1) The Board may enter into a transaction with a related party if

  • (a) the transaction is required for the operation or administration of the Board; and

  • (b) the terms and conditions of the transaction are not less favourable to the Board than market terms and conditions.

• (2) The Board may invest the moneys of the Board in the securities of a related party if those securities are acquired at a public exchange.

• (3) The Board may enter into a transaction with a related party if the value of the transaction is nominal.

• (4) For the purposes of subsection (3), in assessing whether the value of a transaction is nominal, two or more transactions with the same related party shall be considered as a single transaction.

18 Sections 11 to 16 do not apply in respect of

• (a) investments in a corporation that are held as a result of an arrangement, within the meaning of subsection 192(1) of the Canada Business Corporations Act, for the reorganization or liquidation of the corporation or for the amalgamation of the corporation with another corporation, if the investments are to be exchanged for shares or debt obligations; or

• (b) assets that are acquired through the realization of a security interest held by the Board and that are held for a period not exceeding two years after the day on which the assets were acquired.

General

• 19 (1) The moneys of the Board are to be invested

  • (a) in a name that clearly indicates that the investment is held in trust for the Board and, where the investment is capable of being registered, registered in that name;

  • (b) in the name of a financial institution, or a nominee of one, in accordance with a custodial agreement or trust agreement, entered into with the financial institution, that clearly indicates that the investment is held for the Board; or

  • (c) in the name of CDS Clearing and Depository Services Inc., or its nominee, in accordance with a custodial or trust agreement that is entered into with a financial institution and clearly indicates that the investment is held for the Board.

• (2) For the purposes of subsection (1), custodial agreement means an agreement providing that

  • (a) an investment made or held on behalf of the Board pursuant to the agreement

    • (i) constitutes part of the Board’s assets, and

    • (ii) shall not at any time constitute an asset of the custodian or nominee; and

  • (b) records shall be maintained by the custodian that are sufficient to allow the ownership of any investment to be traced to the Board at any time.

20 The Board shall maintain a current record that clearly identifies every investment held by the Board in its name and every investment held in the name of a third party on behalf of the Board, the name in which the investment is made and, where appropriate, the name in which the investment is registered.

PART 2Annual Report

21 The definitions in this section apply in this Part.

compensation

compensation includes annual salary, bonuses, non-cash remuneration, termination arrangements, and deferred compensation, including pension benefits funded by the Board, for service rendered by an individual in all capacities to the Board and its subsidiaries. (rémunération)

executive officers

executive officers means the five most highly compensated officers of the Board or its subsidiaries. (principaux dirigeants)

• 22 (1) The annual report must include a statement of the corporate governance practices of the board of directors that sets out

  • (a) its duties, objectives and mandate;

  • (b) its committees, their composition, mandates and activities;

  • (c) the decisions requiring its prior approval;

  • (d) the procedures in place for the assessment of its performance; and

  • (e) its expectations in respect of the Board’s management.

• (2) The Board shall include, in its annual report, information disclosing the total compensation awarded to, earned by, or paid to the directors and executive officers during the financial year.

• (3) Where a special audit has been conducted pursuant to section 46 of the Act or a special examination has been conducted pursuant to section 47 of the Act, the results must be included in the next annual report.

• (4) The annual report must include a summary of the procedures established under paragraph 8(2)(b) of the Act and of the code of conduct established under paragraph 8(2)(c) of the Act.

Coming into Force

23 These Regulations come into force on the day on which they are registered.